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NORTH CAROLINA
REGISTER
Volume 17, Issue 21
Pages 1829 - 1974
May 1, 2003
This issue contains documents officially filed
through April 9, 2003.
Office of Administrative Hearings
Rules Division
424 North Blount Street (27601)
6714 Mail Service Center
Raleigh, NC 27699-6714
(919) 733-2678
FAX (919) 733-3462
Julian Mann III, Director
Camille Winston, Deputy Director
Molly Masich, Director of APA Services
Ruby Creech, Publications Coordinator
Linda Dupree, Editorial Assistant
Dana Sholes, Editorial Assistant
Rhonda Wright, Editorial Assistant
IN THIS ISSUE
I. EXECUTIVE ORDER
Executive Order No. 49 .............................................1829
II. IN ADDITION
ENR – Notice of Intent to Redevelop a
Brownfields Property – Fiber Mills, LLC ........1830
ENR – Notice of Intent to Redevelop a Brownfields
Property – General Partnership of Samuel J.
Wornom and George R. Perkins, Jr. ..................1831
Revenue – Tax Review Board .....................................1833 - 1864
Voting Rights Letter ....................................................1832
III. RULE-MAKING PROCEEDINGS
Environment and Natural Resources
Health Services, Commission for............................1865
Licensing Boards
Locksmith Licensing Board ......................................1865 - 1866
Transportation
Motor Vehicles, Division of.....................................1865
IV. PROPOSED RULES
Community Colleges
Community Colleges, State Board of......................1877 - 1896
Insurance
Code Officials Qualification Board .........................1867 - 1875
Licensing Boards
Speech and Language Pathologists and
Audiologists, Board of Examiners of ................1875 - 1877
State Personnel
State Personnel Commission....................................1896 - 1900
V. TEMPORARY RULES
Environment and Natural Resources
Wildlife Resources Commission..............................1908 - 1940
Health and Human Services
Secretary, Health and Human Services
Medical Assistance ................................................1901 - 1902
Secretary, Health and Human Services
DMHDDSAS..........................................................1902 - 1908
VI. APPROVED RULES ...................................................1941 - 1961
Agriculture
Food and Drug Protection Division
Community Colleges
Community Colleges Commission
Environment and Natural Resources
Health Services
Health and Human Services
Medical Assistance
Medical Care Commis sion
Secretary of State
Departmental Rules; General Administration Division; Publications
Division; Corporations Division; Securities Division
State Personnel
State Personnel Commission
VII. RULES REVIEW COMMISSION..........................1962
VIII. CONTESTED CASE DECISIONS
Index to ALJ Decisions.................................................1963 - 1969
Text of Selected Decisions
02 CPS 1317 ................................................................1970 - 1974
For the CUMULATIVE INDEX to the NC Register go to:
http://oahnt.oah.state.nc.us/register/CI.pdf
North Carolina Register is published semi-monthly for $195 per year by the Office of Administrative Hearings, 424 North Blount Street, Raleigh, NC
27601. North Carolina Register (ISSN 15200604) to mail at Periodicals Rates is paid at Raleigh, NC. POSTMASTER: Send Address changes to
the North Carolina Register, 6714 Mail Service Center, Raleigh, NC 27699-6714.
NORTH CAROLINA ADMINISTRATIVE CODE CLASSIFICATION SYSTEM
The North Carolina Administrative Code (NCAC) has four major subdivisions of rules. Two of these, titles and
chapters, are mandatory. The major subdivision of the NCAC is the title. Each major department in the North
Carolina executive branch of government has been assigned a title number. Titles are further broken down into
chapters which shall be numerical in order. The other two, subchapters and sections are optional subdivisions to
be used by agencies when appropriate.
TITLE/MAJOR DIVISIONS OF THE NORTH CAROLINA ADMINISTRATIVE CODE
TITLE DEPARTMENT LICENSING BOARDS CHAPTER
1
2
3
4
5
6
7
8
9
10
11
12
13
14A
15A
16
17
18
19A
20
*21
22
23
24
25
26
27
28
Administration
Agriculture
Auditor
Commerce
Correction
Council of State
Cultural Resources
Elections
Governor
Health and Human Services
Insurance
Justice
Labor
Crime Control & Public Safety
Environment and Natural Resources
Public Education
Revenue
Secretary of State
Transportation
Treasurer
Occupational Licensing Boards
Administrative Procedures (Repealed)
Community Colleges
Independent Agencies
State Personnel
Administrative Hearings
NC State Bar
Juvenile Justice and Delinquency
Prevention
Acupuncture
Architecture
Athletic Trainer Examiners
Auctioneers
Barber Examiners
Certified Public Accountant Examiners
Chiropractic Examiners
Employee Assistance Professionals
General Contractors
Cosmetic Art Examiners
Dental Examiners
Dietetics/Nutrition
Electrical Contractors
Electrolysis
Foresters
Geologists
Hearing Aid Dealers and Fitters
Landscape Architects
Landscape Contractors
Locksmith Licensing Board
Massage & Bodywork Therapy
Marital and Family Therapy
Medical Examiners
Midwifery Joint Committee
Mortuary Science
Nursing
Nursing Home Administrators
Occupational Therapists
Opticians
Optometry
Osteopathic Examination & Reg. (Repealed)
Pastoral Counselors, Fee-Based Practicing
Pharmacy
Physical Therapy Examiners
Plumbing, Heating & Fire Sprinkler Contractors
Podiatry Examiners
Professional Counselors
Psychology Board
Professional Engineers & Land Surveyors
Real Estate Appraisal Board
Real Estate Commission
Refrigeration Examiners
Respiratory Care Board
Sanitarian Examiners
Social Work Certification
Soil Scientists
Speech & Language Pathologists & Audiologists
Substance Abuse Professionals
Therapeutic Recreation Certification
Veterinary Medical Board
1
2
3
4
6
8
10
11
12
14
16
17
18
19
20
21
22
26
28
29
30
31
32
33
34
36
37
38
40
42
44
45
46
48
50
52
53
54
56
57
58
60
61
62
63
69
64
68
65
66
Note: Title 21 contains the chapters of the various occupational licensing boards.
NORTH CAROLINA REGISTER
Publication Schedule for January 2003 – December 2003
Filing Deadlines
Notice of
Rule-Making
Proceedings
Notice of Text
Temporary
Rule
volume
& issue
number
issue date last day
for filing
earliest register
issue for
publication of
text
earliest
date for
public
hearing
end of
required
comment
period
deadline to
submit to RRC
for review at
next meeting
first legislative
day of the next
regular session
end of
required
comment
period
deadline to
submit to RRC
for review at
next meeting
first legislative
day of the next
regular session
270th day
from issue
date
17:13 01/02/03 12/06/02 03/03/03 01/17/03 02/03/03 02/20/03 05/00/04 03/03/03 03/20/03 05/00/04 09/29/03
17:14 01/15/03 12/19/02 03/17/03 01/30/03 02/14/03 02/20/03 05/00/04 03/17/03 03/20/03 05/00/04 10/12/03
17:15 02/03/03 01/10/03 04/15/03 02/18/03 03/05/03 03/20/03 05/00/04 04/04/03 04/21/03 05/00/04 10/31/03
17:16 02/17/03 01/27/03 05/01/03 03/04/03 03/19/03 03/20/03 05/00/04 04/21/03 04/21/03 05/00/04 11/14/03
17:17 03/03/03 02/10/03 05/15/03 03/18/03 04/02/03 04/21/03 05/00/04 05/02/03 05/20/03 05/00/04 11/28/03
17:18 03/17/03 02/24/03 06/02/03 04/01/03 04/16/03 04/21/03 05/00/04 05/16/03 05/20/03 05/00/04 12/12/03
17:19 04/01/03 03/11/03 06/02/03 04/16/03 05/01/03 05/20/03 05/00/04 06/02/03 06/20/03 05/00/04 12/27/03
17:20 04/15/03 03/25/03 06/16/03 04/30/03 05/15/03 05/20/03 05/00/04 06/16/03 06/20/03 05/00/04 01/10/04
17:21 05/01/03 04/09/03 07/01/03 05/16/03 06/02/03 06/20/03 05/00/04 06/30/03 07/21/03 05/00/04 01/26/04
17:22 05/15/03 04/24/03 07/15/03 05/30/03 06/16/03 06/20/03 05/00/04 07/14/03 07/21/03 05/00/04 02/09/04
17:23 06/02/03 05/09/03 08/01/03 06/17/03 07/02/03 07/21/03 05/00/04 08/01/03 08/20/03 05/00/04 02/27/04
17:24 06/16/03 05/23/03 08/15/03 07/01/03 07/16/03 07/21/03 05/00/04 08/15/03 08/20/03 05/00/04 03/12/04
18:01 07/01/03 06/10/03 09/02/03 07/16/03 07/31/03 08/20/03 05/00/04 09/02/03 09/22/03 05/00/04 03/27/04
18:02 07/15/03 06/23/03 09/15/03 07/30/03 08/14/03 08/20/03 05/00/04 09/15/03 09/22/03 05/00/04 04/10/04
18:03 08/01/03 07/11/03 10/01/03 08/16/03 09/02/03 09/22/03 05/00/04 09/30/03 10/20/03 05/00/04 04/27/04
18:04 08/15/03 07/25/03 10/15/03 08/30/03 09/15/03 09/22/03 05/00/04 10/14/03 10/20/03 05/00/04 05/11/04
18:05 09/02/03 08/11/03 11/03/03 09/17/03 10/02/03 10/20/03 05/00/04 11/03/03 11/20/03 05/00/04 05/29/04
18:06 09/15/03 08/22/03 11/17/03 09/30/03 10/15/03 10/20/03 05/00/04 11/14/03 11/20/03 05/00/04 06/11/04
18:07 10/01/03 09/10/03 12/01/03 10/16/03 10/31/03 11/20/03 05/00/04 12/01/03 12/22/03 05/00/04 06/27/04
18:08 10/15/03 09/24/03 12/15/03 10/30/03 11/14/03 11/20/03 05/00/04 12/15/03 12/22/03 05/00/04 07/11/04
18:09 11/03/03 10/13/03 01/02/04 11/18/03 12/03/03 12/22/03 05/00/04 01/02/04 01/20/04 05/00/04 07/30/04
18:10 11/17/03 10/24/03 02/02/04 12/02/03 12/17/03 12/22/03 05/00/04 01/16/04 01/20/04 05/00/04 08/13/04
18:11 12/01/03 11/05/03 02/02/04 12/16/03 12/31/03 01/20/04 05/00/04 01/30/04 02/20/04 05/00/04 08/27/04
18:12 12/15/03 11/20/03 02/16/04 12/30/03 01/14/04 01/20/04 05/00/04 02/13/04 02/20/04 05/00/04 09/10/04
non-substantial economic impact substantial economic impact
EXPLANATION OF THE PUBLICATION SCHEDULE
This Publication Schedule is prepared by the Office of Administrative Hearings as a public service and the computation of time periods are not to be deemed binding or controlling. Time is
computed according to 26 NCAC 2C .0302 and the Rules of Civil Procedure, Rule 6.
GENERAL
The North Carolina Register shall be
published twice a month and contains the
following information submitted for
publication by a state agency:
(1) temporary rules;
(2) notices of rule-making proceedings;
(3) text of proposed rules;
(4) text of permanent rules approved by
the Rules Review Commission;
(5) notices of receipt of a petition for
municipal incorporation, as required
by G.S. 120-165;
(6) Executive Orders of the Governor;
(7) final decision letters from the U.S.
Attorney General concerning
changes in laws affecting voting in a
jurisdiction subject of Section 5 of
the Voting Rights Act of 1965, as
required by G.S. 120-30.9H;
(8) orders of the Tax Review Board
issued under G.S. 105-241.2; and
(9) other information the Codifier of
Rules determines to be helpful to the
public.
COMPUTING TIME: In computing time in
the schedule, the day of publication of the
North Carolina Register is not included.
The last day of the period so computed is
included, unless it is a Saturday, Sunday, or
State holiday, in which event the period
runs until the preceding day which is not a
Saturday, Sunday, or State holiday.
FILING DEADLINES
ISSUE DATE: The Register is published on
the first and fifteen of each month if the
first or fifteenth of the month is not a
Saturday, Sunday, or State holiday for
employees mandated by the State
Personnel Commission. If the first or
fifteenth of any month is a Saturday,
Sunday, or a holiday for State employees,
the North Carolina Register issue for that
day will be published on the day of that
month after the first or fifteenth that is not
a Saturday, Sunday, or holiday for State
employees.
LAST DAY FOR FILING: The last day for
filing for any issue is 15 days before the
issue date excluding Saturdays, Sundays,
and holidays for State employees.
NOTICE OF RULE-MAKING PROCEEDINGS
END OF COMMENT PERIOD TO A NOTICE OF
RULE-MAKING PROCEEDINGS: This date is 60
days from the issue date. An agency shall
accept comments on the notice of rule-making
proceeding until the text of the proposed rules
is published, and the text of the proposed rule
shall not be published until at least 60 days
after the notice of rule-making proceedings
was published.
EARLIEST REGISTER ISSUE FOR PUBLICATION
OF TEXT: The date of the next issue following
the end of the comment period.
NOTICE OF TEXT
EARLIEST DATE FOR PUBLIC HEARING:
The hearing date shall be at least 15 days
after the date a notice of the hearing is
published.
END OF REQUIRED COMMENT PERIOD
(1) RULE WITH NON-SUBSTANTIAL
ECONOMIC IMPACT: An agency shall
accept comments on the text of a proposed
rule for at least 30 days after the text is
published or until the date of any public
hearings held on the proposed rule,
whichever is longer.
(2) RULE WITH SUBSTANTIAL
ECONOMIC IMPACT: An agency shall
accept comments on the text of a proposed
rule published in the Register and that has
a substantial economic impact requiring a
fiscal note under G.S. 150B-21.4(b1) for
at least 60 days after publication or until
the date of any public hearing held on the
rule, whichever is longer.
DEADLINE TO SUBMIT TO THE RULES
REVIEW COMMISSION: The Commission
shall review a rule submitted to it on or
before the twentieth of a month by the last
day of the next month.
FIRST LEGISLATIVE DAY OF THE NEXT
REGULAR SESSION OF THE GENERAL
ASSEMBLY: This date is the first
legislative day of the next regular session
of the General Assembly following
approval of the rule by the Rules Review
Commission. See G.S. 150B-21.3,
Effective date of rules.
EXECUTIVE ORDER
17:21 NORTH CAROLINA REGISTER May 1, 2003
1829
EXECUTIVE ORDER NO. 49
PROCLAMATION OF STATE OF
DISASTER FOR THE CITY OF EDEN
WHEREAS, I have determined that a State of Disaster
and State of Emergency, as defined in N.C.G.S. §§ 166A-4 and
14.288.1(10), exists in the State of North Carolina, specifically
in the City of Eden as a result of severe drought conditions.
WHEREAS, on 17 December 2002, the City of Eden
proclaimed a local State of Emergency;
WHEREAS, pursuant to N.C.G.S. § 166A-6, the criteria
of Type I disaster are met including the following: 1) Receipt of
the preliminary damage assessment from the Secretary of Crime
Control and Public Safety; 2) The City of Eden declared a local
state of emergency pursuant to N.C.G.S. § 166A-8 and N.C.G.S.
§§ 14-288.12, 14-288.13 and 14-288.14, and forwarded a written
copy of the declaration to the Governor; 3) The preliminary
damage assessment meets or exceeds the criteria established for
the Small Business Disaster Loan Program pursuant to 13 C.F.R.
Part 123, or meets or exceeds the State infrastructure criteria set
out in N.C.G.S. § 166A-6.01(b)(2)a; and 4) A major disaster
declaration by the President of the United States pursuant to the
Stafford Act has not been declared; and
NOW THEREFORE, pursuant to the authority vested
in me as Governor by the Constitution and the laws of the State
of North Carolina, IT IS ORDERED:
Section 1. Pursuant to N.C.G.S. §§ 166A-6 and
14-288.15, a State of Disaster and State of Emergency is hereby
declared for the City of Eden.
Section 2. State and local government entities
and agencies are hereby ordered to cooperate in the
implementation of the provisions of this proclamation and the
provisions of the North Carolina Emergency Operations Plan.
Section 3. Bryan E. Beatty, Secretary of Crime
Control and Public Safety and/or his designee, is hereby
delegated all power and authority granted to me and required of
me by Chapter 166A and Article 36A of Chapter 14 of the
General Statutes for the purpose of implementing the said
Emergency Operations Plan and to take such further action as is
necessary to promote and secure the safety and protection of the
populace in the above-referenced City.
Section 4. Further, Bryan E. Beatty, Secretary of
Crime Control and Public Safety, as chief coordinating officer
of the State of North Carolina, shall exercise the powers
prescribed in N.C.G.S. § 143B-476.
Section 5. I authorize this proclamation: (a) to
be distributed to the news media and other organizations
calculated to bring its contents to the attention of the general
public; (b) unless the circumstances of the state of disaster
prevent or impede, to be promptly filed with the Secretary of
Crime Control and Public Safety, the Secretary of State, and the
clerks of superior court in the counties to which it applies; and
(c) to be distributed to others as necessary to assure proper
implementation of this proclamation.
Section 6 The Type I disaster declaration shall
expire 30 days after the issuance of the state of disaster and
state of emergency and Type I disaster proclamation for the
City of Eden, issued on April 2, 2003, unless renewed by the
Governor or the General Assembly. Such renewals may be
made in increments of 30 days each, not to exceed a total of
120 days from the date for first issuance. The Joint Legislative
Commission on Governmental Operations shall be notified
prior to the issuance of any renewal of a Type I disaster
declaration.
Done in the Capital City of Raleigh, North Carolina this the 2nd
day of April 2003.
__________________________________
MICHAEL F. EASLEY
GOVERNOR
ATTEST:
___________________________________
ELAINE MARSHALL
SECRETARY OF STATE
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1830
This Section contains public notices that are required to be published in the Register or have been approved by the Codifier of
Rules for publication.
SUMMARY OF NOTICE OF
INTENT TO REDEVELOP A BROWNFIELDS PROPERTY
FIBER MILLS, LLC
Pursuant to N.C.G.S. 130A -310.34, Fiber Mills, LLC has filed with the North Carolina Department of Environment and Natural
Resources ("DENR") a Notice of Intent to Redevelop a Brownfields Property ("Property") in Charlotte, Mecklenburg County, North
Carolina. The Property consists of approximately 9 acres and is located at 1000 Seaboard Avenue, at its intersection with Hamilton
Street. Environmental contamination exists on the Property in soil. Fiber Mills, LLC has committed itself to redevelopment of the
Property for nothing other than a mixed-use project that may include industrial, commercial, retail and residential uses. The Notice of
Intent to Redevelop a Brownfields Property includes: (1) a proposed Brownfields Agreement between DENR and Fiber Mills, LLC,
which in turn includes (a) a legal description of the Property, (b) a map showing the location of the Property, (c) a description of the
contaminants involved and their concentrations in the media of the Property, (d) the above-stated description of the intended future use
of the Property, and (e) proposed investigation and remediation; and (2) a proposed Notice of Brownfields Property prepared in
accordance with G.S. 130A-310.35. The full Notice of Intent to Redevelop a Brownfields Property may be reviewed at 600 East
Trade Street, Neighborhood Development Key Business, Charlotte, NC, 28217 by contacting Carolyn Minnich at that address, at
carolyn.minnich@ncmail.net or at (704) 336-3499; or at 401 Oberlin Rd., Raleigh, NC 27605 by contacting Scott Ross at that address,
at scott.ross@ncmail.net, or at (919) 733-2801, ext. 328. Written public comments may be submitted to DENR within 60 days after
the date this Notice is published in a newspaper of general circulation serving the area in which the brownfields property is located, or
in the North Carolina Register, whichever is later. Written requests for a public meeting may be submitted to DENR within 30 days
after the period for written public comments begins. All such comments and requests should be addressed as follows:
Mr. Bruce Nicholson
Head, Special Re mediation Branch
Superfund Section
Division of Waste Management
NC Department of Environment and Natural Resources
401 Oberlin Road, Suite 150
Raleigh, North Carolina 27605
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1831
SUMMARY OF NOTICE OF
INTENT TO REDEVELOP A BROWNFIELDS PROPERTY
General Partnership of Samuel J. Wornom and George R. Perkins, Jr.
Pursuant to N.C.G.S. 130A-310.34, the General Partnership of Samuel J. Wornom and George R. Perkins, Jr. has filed with the North
Carolina Department of Environment and Natural Resources ("DENR") a Notice of Intent to Redevelop a Brownfields Property
("Property") in Sanford, Lee County, North Carolina. The Property consists of 22.8 acres located at the intersection of US-1 Bypass
and Spring Lane. It is bordered to the northeast by industrial acreage, to the north and northwest by undeveloped property, to the
south by commercial retail businesses, to the east by Wilkinson Cadillac car dealership, to the southeast by a State Employees Credit
Union branch, and to the west by land used for residential purposes. Environmental contamination exists on the Property in soil and
groundwater. The partnership of Samuel J. Wornom and George R. Perkins, Jr. has committed itself to make no use of the Property
other than for commercial and retail purposes. The Notice of Intent to Redevelop a Brownfields Property includes: (1) a proposed
Brownfields Agreement between DENR and the partnership of Samuel J. Wornom and George R. Perkins, Jr., which in turn includes
(a) a legal description of the Property, (b) a map showing the location of the Property, (c) a description of the contaminants involved
and their concentrations in the media of the Property, (d) the above-stated description of the intended future use of the Property, and
(e) proposed investigation and remediation; and (2) a proposed Notice of Brownfields Property prepared in accordance with G.S.
130A-310.35. The full Notice of Intent to Redevelop a Brownfields Property may be reviewed at the Suzanne B. Reeves Library, 107
Hawkins Avenue, Sanford, NC 27330, by contacting Michael Matochik at that address or at 919-774-6045; or at 401 Oberlin Rd.,
Raleigh, NC 27605 by contacting Scott Ross at that address, at scott.ross@ncmail.net, or at (919)733-2801, ext. 328. Written
comments may be submitted to DENR within 60 days after the date this Notice is published in a newspaper of general circulation
serving the area in which the Property is located, or in the North Carolina Register, whichever is later. Written requests for a public
meeting may be submitted to DENR within 30 days after the period for written comments begins. All such comments and requests
should be addressed as follows:
Mr. Bruce Nicholson
Head, Special Remediation Branch
Division of Waste Management
NC Department of Environment and Natural Resources
401 Oberlin Road, Suite 150
Raleigh, North Carolina 27605
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1832
U.S. Department of Justice
Civil Rights Division
JDR:MSR:ALF:par Voting Section – NWB.
DJ 166-012-3 950 Pennsylvania Ave., NW
2003-0462 Washington, D.C. 20530
March 24, 2003
Richard J. Rose, Esq.
Poyner & Spruill
P.O. Box 353
Rocky Mount, NC 27802-0353
Dear Mr. Rose:
This refers to three annexations (Ordinance Nos. 0-2002-31, 0-2002-100, and 0-2002-112) and their designation to wards of
the City of Rocky Mount in Edgecombe and Nash Counties, North Carolina, submitted to the Attorney General pursuant to Section 5
of the Voting Rights Act, 42 U.S.C. 1973c. We received your submission on February 12, 2003.
The Attorney General does not interpose any objection to the specified changes. However, we note that Section 5 expressly
provides that the failure of the Attorney General to object does not bar subsequent litigation to enjoin the enforcement of the changes.
In addition, as authorized by Section 5, we reserve the right to reexamine this submission if additional information that would
otherwise require an objection comes to our attention during the reminder of the sixty-day review period. See the Procedures for the
Administration of Section 5 (28 C.F.R. 51.41 and 51.43).
Sincerely,
Joseph D. Rich
Chief, Voting Section
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1833
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessment of Sales and Use )
Tax for the period of October 1, 1992 through )
September 30, 1998 by Secretary of Revenue )
) ADMINISTRATIVE DECISION
) NUMBER: 389
vs. ) as Amended
)
Capital Area Soccer League, Inc. )
This Matter was heard before the Regular Tax Review Board (hereinafter "Board") in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on April 16, 2002, upon a petition filed by Capital Area Soccer League, Inc.
(hereinafter "Taxpayer") for administrative review of the Final Decision of the Secretary of Revenue entered on July 9, 2001,
sustaining the proposed assessment of sales and use tax for the period of October 1, 1992 through September 30, 1998.
Chairman Richard H. Moore, State Treasurer, presided over the hearing with Jo Anne Sanford, Chair, Utilities Commission
and duly appointed member, Noel L. Allen, attorney at law participating.
Attorney Robert V. Bode represented the Taxpayer at the hearing. Kay Linn Miller Hobart, Assistant Attorney General,
appeared at the hearing on behalf of the Secretary of Revenue.
On October 30, 1998, the Department of Revenue completed a sales and use tax audit of the Taxpayer's records and proposed
to assess additional tax, penalties and interest because Taxpayer failed to remit use tax on taxable purchases from out-of-state vendors.
The Taxpayer objected to the assessment on the basis that it would be eligible for a refund of sales and use tax under N.C. Gen. Stat.
105-164.14(b). Even though the hearing before the Secretary of Revenue was a direct result of the audit assessment, the primary issue
considered by the Assistant Secretary was whether the Taxpayer is eligible for a refund of sales and use tax paid pursuant to N.C. Gen.
Stat. 105-164.14(b).
On July 9, 2001, the Acting Assistant Secretary issued a final decision sustaining the proposed assessment of sales and use
tax for the period of October 1, 1992 through September 30, 1998. In sustaining the use tax assessment against the Taxpayer, the
Assistant Secretary determined that the Taxpayer was not an educational or charitable institution within the meaning of N.C. Gen.
Stat. 105-164.14(b) and was ineligible for a refund of sale and use tax paid pursuant to N.C. Gen. Stat. 105-164.14(b). The Assistant
Secretary held that the Taxpayer is an amateur sports organization, established to promote soccer and to serve the interests of its teams
and players. The Assistant Secretary also held that the Department of Revenue correctly denied Taxpayer's refund claims. Pursuant to
N.C. Gen. Stat. 105-241.2, the Taxpayer timely filed a notice of intent and petition for administrative review of the Assistant
Secretary's Final Decision with the Tax Review Board.
On July 10, 2002, the Tax Review Board entered Administrative Decision Number 389 and determined that there existed
sufficient evidence in the record to show that the Taxpayer conducts charitable and educational activities which benefit the area youth
and children and the Taxpayer provides an educational and charitable serve to the area youth children. Thus, the Tax Review Board
ruled that Taxpayer was an educational institution and/or charitable organization within the meaning of N.C. Gen. Stat. 105-164.14(b)
and ordered that the Secretary of Revenue's decision be reversed.
On August 9, 2002, the North Carolina Department of Revenue ("Department of Revenue"), through counsel, filed a Petition
for Judicial Review of Administrative Decision No. 389 in Wake County Superior Court and also filed a Motion to Amend
Admin istrative Decision No. 389 with the Tax Review Board. The Tax Review Board, at the September 5, 2002 meeting, reviewed
the Department of Revenue's Motion to Amend and discussed the issue of its jurisdiction to consider the motion when the Department
of Revenue had petitioned the Court for judicial review of Administrative Decision Number 389.
The Tax Review Board, having determined that it may exercise jurisdiction to consider the motion, and upon review of the
administrative decision and the motion to amend, grants the Department of Revenue's motion and amends Administrative Decision
Number 389 as follows. The Tax Review Board amends Administrative Decision Number 389 by striking the sentence: "Thus, the
Taxpayer is not liable for use tax on its purchases of tangible personal property and is eligible for a refund of sales and use tax paid
pursuant to N.C. Gen. Stat. 105-164.14(b)" and substituting that sentence with the following sentence: Thus, the Taxpayer is eligible
for a refund of sales and use tax paid pursuant to N.C. Gen. Stat. 105-164.14(b).
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1834
WHEREFORE, THE TAX REVIEW BOARD ORDERS that the Department of Revenue's motion be granted and
Administrative Decision Number 389 be and is hereby amended.
Made and entered into the 31st day of January 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1835
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessment of Unauthorized )
Substance Tax Dated June 5, 2001 by the )
Secretary of Revenue of North Carolina )
) ADMINISTRATIVE DECISION
) NUMBER: 391
vs. )
)
Jeffrey Robert Wellman, )
Taxpayer
This Matter was heard before the Tax Review Board (hereinafter "Board") in the City of Raleigh, North Carolina, in the
office of the State Treasurer, on Wednesday, June 12, 2002, upon Jeffrey Robert Wellman's (hereinafter "Taxpayer") petition for
administrative review of the Final Decision of Eugene J. Cella, Assistant Secretary for Administrative Hearings, of the North Carolina
Department of Revenue entered on November 21, 2001, sustaining the assessment of unauthorized substance tax for the period of June
5, 2001.
Chairman Richard H. Moore, State Treasurer, presided over the hearing with Jo Anne Sanford, Chair, Utilities Commission
and duly appointed member, Noel L. Allen, Attorney at Law participating.
The Taxpayer did not appear at the hearing. David J. Adinolfi, II, Associate Attorney General, represented the North
Carolina Secretary of Revenue at the hearing.
Pursuant to G.S. 105-113.111(a) and G.S. 105-241.1, a Notice of Unauthorized Substance Tax Assessment was issued to the
Taxpayer on June 5, 2001. The notice related to a proposed assessment of tax, penalty and interest in the total amount of $1,4000.00
based upon the possession of 61 dosages of oxycodone. The assessment alleged that on February 25, 2001, the Taxpayer possessed a
total of 61 dosages of oxycodone that did not have the proper tax stamps affixed thereto. After conducting a hearing, the Assistant
Secretary entered his decision sustaining the proposed assessment against the Taxpayer. Thereafter, the Taxpayer, through counsel,
timely filed a notice and petition for administrative review of the Assistant Secretary's Final Decision with the Tax Review Board.
ISSUES
The issues considered by the Board upon administrative review of this matter are stated as follows:
1. Did the Taxpayer have actual and/or constructive possession of oxycodone without the proper stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance tax?
EVIDENCE
The evidence submitted to the Assistant Secretary and included in the record for the Board's review is stated as follows:
1. US-1 Form BD-10, Notice of Unauthorized Substance Tax Assessment, dated June 5, 2001.
2. US-2 Letter from the Taxpayer's attorney, dated July 2, 2001, requesting a hearing.
3. US-3 Letter to the Taxpayer's attorney, dated July 9, 2001, advising him that his client's Administrative Tax Hearing
was scheduled for September 25, 2001.
4. US-4 Letter from the Taxpayer's attorney, dated July 17, 2001, requesting that the hearing be conducted by written
communication.
5. US-5 Form BD-4, Report of Arrest and/or Seizure Involving Nontaxpaid (Unstamped) Controlled Substances, which
names the Taxpayer as the possessor of the controlled substances.
6. US-6 Metropolitan Enforcement Group's investigation report.
7. US-7 Memorandum from E. Norris Tolson, Secretary of Revenue, dated May 16, 2001, delegating to Eugene J.
Cella, Assistant Secretary of Administrative Hearings, the authority to hold any hearing required or allowed under
Chapter 105 of the North Carolina General Statutes.
FINDINGS OF FACT
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1836
The Board reviewed the following findings of fact in the Assistant Secretary's decision in this matter:
1. Assessment of Unauthorized Substance Tax was made against the Taxpayer on June 5, 2001, in the sum of
$1,400.00 tax, $560.00 penalty and $31.11 interest, for a total proposed liability of $1,991.11, based on possession
of 61 dosages of oxycodone.
2. The Taxpayer made a timely objection and application for hearing.
3. An administrative tax hearing is not the appropriate forum to address constitutional issues.
4. G.S. 105-113.06(3) clearly defines a "dealer" as a person who actually or constructively possesses 10 or more
dosage units of any controlled substance that is not sold by weight.
5. On February 25, 2001, the Taxpayer possessed 61 dosages of oxycodone.
6. No tax stamps were purchased for or affixed to the oxycodone as required by law.
CONCLUSIONS OF LAW
The Board reviewed the following conclusions of law made by the Assistant Secretary in his decision regarding this matter:
1. An assessment of tax is presumed to be correct.
2. The burden is upon Taxpayer who objects to an assessment to overcome that presumption.
3. Per G.S. 105-113.109, a dealer who actually or constructively possesses an unauthorized substance in this State,
upon which the tax has not been paid, is required to purchase and affix the appropriate stamp. Tax is due from the
dealer at the time the dealer comes into possession of the unauthorized substance.
4. The Taxpayer had actual possession of a total of 61 dosages of oxycodone on February 25, 2001, and was therefore
a dealer as that term is defined in G.S. 105-113.106(3).
5. The Taxpayer is liable for $1,400.00 tax, $560.00 penalty and interest until date of full payment.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by G.S. 105-241.2(b2). After
the Board conducts a hearing, this statute provides in pertinent part:
(b2). "The Board shall confirm, modify, reverse, reduce or
increase the assessment or decision of the Secretary."
Pursuant to G.S. 105-241.1(a), a proposed tax assessment is presumed to be correct and the burden is on the Taxpayer to
rebut that presumption. Since the Taxpayer failed to provide any evidence to overcome the presumption, the Assistant Secretary
properly determined that the Taxpayer possessed an unauthorized substance on February 25, 2001.
The Board having conducted a hearing in this matter and having considered the petition, the brief, the final decision and the
documents of record, concludes that the Assistant Secretary properly determined that the Taxpayer possessed an unauthorized
substance and was a dealer as that term is defined in G.S. 105-113.106(3). Since the unauthorized substance tax is levied at a rate of
$200.00 per 10 dosage units, this Board determines that the Taxpayer's tax assessment liability, regarding his possession of an
unauthorized substance on February 25, 2001, was $1,200.00, based upon the possession of 61 dosage units, rather than $1,400.00.
Thus, this Board reduces the tax assessment levied against the Taxpayer by $200.00.
WHEREFORE, THE TAX REVIEW BOARD ORDERS that the tax assessment levied against the Taxpayer in this
matter be reduced to $1,200.00 and further orders that the Taxpayer is liable, to the North Carolina Department of Revenue, for the tax
in the amount of $1,200.00, plus penalty and interest as allowed by law.
Made and entered into the 15th day of October 2002.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1837
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Additional )
Income Tax for the Taxable Years 1998, and 1999 )
by the Secretary of Revenue North Carolina )
) ADMINISTRATIVE DECISION
) NUMBER: 392
vs. )
)
James L. and Beverly J. Javurek, )
Taxpayers
THIS MATTER is before the Regular Tax Review Board (hereinafter "Regular Board") upon petition for administrative
review filed by James L. and Beverly J. Javurek (hereinafter "Taxpayer") regarding the Final Decision of Eugene J. Cella, Assistant
Secretary for Administrative Hearings of the Department of Revenue (hereinafter "Assistant Secretary"), sustaining the proposed
assessments of additional individual income taxes for taxable years 1998 and 1999.
Pursuant to G.S. 105-241.1, the North Carolina Department of Revenue mailed the Taxpayers Notices of Individual Income
Tax Assessments dated June 12, 2001, assessing tax, penalties and accrued interest for the taxable years 1998 and 1999. The
Taxpayer objected to the assessments and filed a request for hearing. After conducting a hearing, the Assistant Secretary of Revenue
entered a Final Decision, on December 10, 2001, sustaining the proposed assessments of additional individual income tax liability in
the total amount of $1,936.56. Pursuant to G.S. 105-241.2, the Taxpayers filed a notice of intent and petition for administrative
review of the Assistant Secretary's Final Decision with the Tax Review Board.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, the records and documents transmitted by the North
Carolina Secretary of Revenue pertaining to this matter; and it appearing to the Board that Taxpayers' petition for administrative
review should be dismissed since the grounds and arguments upon which relief is sought have been repeatedly rejected by the Courts
and are deemed lacking in legal merit. Thus, the Board concludes that Taxpayers' petition for administrative review is frivolous and is
filed for the purpose of delay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Taxpayer's petition for administrative review be
and is hereby Dismissed.
Made and entered into the 15th day of October 2002.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1838
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Additional )
Income Tax for the Taxable Years 1998, and 1999 )
by the Secretary of Revenue )
) ADMINISTRATIVE DECISION
) NUMBER: 393
vs. )
)
Richard Bryan Henning and Janice G. Henning, )
Taxpayers
THIS MATTER is before the Regular Tax Review Board (hereinafter "Regular Board") upon petition for administrative
review filed by Richard Bryan Henning and Janice G. Henning (hereinafter "Taxpayers") regarding the Final Decision of Eugene
J. Cella, Assistant Secretary for Administrative Hearings of the North Carolina Department of Revenue, (hereinafter "Assistant
Secretary"), sustaining the proposed assessment of additional individual income tax liability in the total amount of $3,273.63 against
Mr. Henning for tax year 1998 and the proposed assessment of additional individual income tax liability in total amount of $1,964.72
for taxable year 1998 and $644.06 for tax year 1999 against the Taxpayers.
Pursuant to G.S. 105-241.1, the North Carolina Department of Revenue mailed the Taxpayers Notices of Individual Income
Tax Assessments dated August 23, 2000, assessing tax, penalties and accrued interest for the taxable years 1998, and 1999. The
Taxpayers objected to the assessments and filed a request for hearing. After conducting a hearing, the Assistant Secretary of Revenue
entered a final decision sustaining the proposed assessments. Pursuant to G.S. 105-241.2, the Taxpayers filed a notice of intent and
petition for administrative review of the Assistant Secretary's Final Decision with the Tax Review Board.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, the records and documents transmitted by the Secretary
of Revenue pertaining to this matter; and it appearing to the Board that the Taxpayers' petition for administrative review should be
dismissed since the grounds and arguments upon which relief is sought have been repeatedly rejected by the Courts and are deemed
lacking in legal merit. Thus, the Board concludes that Taxpayers' petition for administrative review is frivolous and is filed for the
purpose of delay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Taxpayer's petition for review be and is hereby
Dismissed.
Made and entered into the 15th day of October 2002.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. A llen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1839
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Additional )
Income Tax for the Taxable Years 1994, 1995, 1996, )
1997, and 1998 by the Secretary of Revenue )
) ADMINISTRATIVE DECISION
) NUMBER: 394
vs. )
)
Thomas Tilley, )
Taxpayer
THIS MATTER is before the Regular Tax Review Board (hereinafter "Regular Board") upon petition for administrative
review filed by Thomas E. Tilley (hereinafter "Taxpayer") regarding the Final Decision of Eugene J. Cella, Assistant Secretary for
Administrative Hearings of the North Carolina Department of Revenue (hereinafter "Assistant Secretary"), entered on July 9, 2001,
sustaining the proposed assessment of additional individual income tax for taxable years 1994, 1995, 1996, 1997, and 1998.
Pursuant to G.S. 105-241.1, the North Carolina Department of Revenue mailed the Taxpayer Notices of Individual Income
Tax Assessments dated May 21, 2000, assessing tax, penalties and accrued interest for the taxable years 1994, 1995, 1996, 1997, and
1998 in the total amount of $99,355.99. The Taxpayer objected to the assessments and filed a request for hearing. After conducting a
hearing, the Assistant Secretary of Revenue entered a Final Decision sustaining the proposed assessments for individual income tax
liability against the Taxpayer. Pursuant to G.S. 105-241.2, the Taxpayer filed a notice of intent and petition for administrative review
of the Assistant Secretary's Final Decision with the Tax Review Board.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, the records and documents transmitted by the North
Carolina Secretary of Revenue pertaining to this matter; and it appearing to the Board that the Taxpayer's petition should be dismissed
since the grounds and arguments upon which relief is sought have been repeatedly rejected by the Courts and are deemed lacking in
legal merit. Thus, the Board concludes that the Taxpayer's petition for administrative review is frivolous and is filed for the purpose
of delay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that the Taxpayer's petition for administrative review be
and is hereby Dismissed.
Made and entered into the 15th day of October 2002.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1840
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Additional )
Income Tax for the Taxable Years 1993, 1994, 1995, )
1996, 1997, 1998 and 1999 by the Secretary of )
Revenue of North Carolina ) ADMINISTRATIVE DECISION
) NUMBER: 395
vs. )
)
John C. Ainsworth, )
Taxpayer
THIS MATTER is before the Regular Tax Review Board (hereinafter "Regular Board") upon petition for administrative review filed
by John C. Ainsworth (hereinafter "Taxpayer") regarding the Final Decision of Eugene J. Cella, Assistant Secretary for
Administrative Hearings of the North Carolina Department of Revenue (hereinafter "Assistant Secretary"), sustaining the proposed
assessment of additional individual income tax liability for taxable years 1993, 1994, 1995, 1996, 1997, 1998, and 1999.
Pursuant to G.S. 105-241.1, the North Carolina Department of Revenue mailed the Taxpayer Notices of Individual Income
Tax Assessments dated March 11, 2000, February 12, 2001, and March 14, 2001, assessing tax, penalties and accrued interest for the
taxable years 1993, 1994, 1995, 1996, 1997, 1998, and 1999. The Taxpayer objected to the assessments and filed a request for
hearing. After conducting a hearing, the Assistant Secretary of Revenue entered a Final Decision, on February 7, 2002, sustaining the
proposed assessments against the Taxpayer for individual income tax liability in the total amount of $30,927.90. Pursuant to G.S.
105-241.2, the Taxpayer filed a notice of intent and petition for administrative review of the Assistant Secretary's Final Decision with
the Tax Review Board.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, the records and documents transmitted by the North
Carolina Secretary of Revenue pertaining to this matter; and it appearing to the Board that the Taxpayer's petition should be dismissed
since the grounds and arguments upon which relief is sought have been repeatedly rejected by the Courts and are deemed lacking in
legal merit. Thus, the Board concludes that Taxpayer's petition for administrative review is frivolous and is filed for the purpose of
delay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Taxpayer's petition for administrative review be
and is hereby Dismissed.
Made and entered into the 15th day of October 2002.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1841
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Sales and Use Tax )
For the periods November through December 1995, )
April 1996 through March 1997, June through July )
1997, September 1997 through January 1998, March ) ADMINISTRATIVE DECISION
through April 1998, and July through August 1998, ) NUMBER: 396
by the Secretary of Revenue )
vs. )
)
Richard M. Pearman, Jr., )
President of Dependable Housing, Inc. )
This matter was heard before the Regular Tax Review Board (hereinafter "Board") in the City of Raleigh, Wake County, North Carolina, in
the office of the State Treasurer on Thursday, September 5, 2002, upon a petition filed by Richard M. Pearman, Jr., President of Dependable
Housing, Inc., ("Taxpayer") for administrative review of the Final Decision of the Secretary of Revenue entered on December 19, 2000, sustaining
the proposed assessment of sales and use tax for the periods of November through December 1995, April 1996 through March 1997, June through
July 1997, September 1997 through January 1998, March through April 1998, and July through August 1998.
Chairman Richard H. Moore, State Treasurer, presided over the hearing with Jo Anne Sanford, Chair, Utilities Commission and duly
appointed member, Noel L. Allen, attorney at law participating.
Counsel for the Taxpayer did not appear at the hearing. George W. Boylan, Special Deputy Attorney General, appeared at the hearing on behalf of
the Secretary of Revenue.
The Taxpayer appeals from an adverse Final Decision of the Secretary of Revenue entered on December 19, 2000 sustaining a proposed
assessment of sales and use tax for the periods at issue. The Taxpayer was the president of Dependable Housing, Inc., trading as Westwood Homes,
a North Carolina corporation engaged in the business of selling manufactured housing at retail. The corporation filed sales and use tax returns for the
periods in question, reporting tax due, but sent in the reports without remittance of tax. The corporation was assessed tax, penalty and interest for the
periods in question. The corporation did not protest the assessments. The corporation ceased doing business in January 1999.
On October 15, 1999, the Department of Revenue mailed Notices of Sales and Use Tax Assessment to the Taxpayer as President of
Dependable Housing, Inc. The Taxpayer objected to the assessments and requested a hearing that was conducted on August 23, 2000. On December
19, 2000, the Assistant Secretary entered a final decision, which sustained the proposed assessment of sales tax, and penalties that was issued against
the Taxpayer. Thereafter, Taxpayer filed a petition for administrative review of the Assistant Secretary's adverse decision with the Tax Review
Board. In the petition, Taxpayer contends that the Department failed to produce sufficient evidence to show that he is a "responsible corporate
officer" within the meaning of either G.S. 105-253(b)(1) or (2).
In the final decision, the Assistant Secretary made findings of fact that the Taxpayer, as president of the corporation, is a responsible officer
of the corporation under G.S. 105-253. If the Taxpayer failed to make reasonable and prudent inquiry into the proper procedures for remitting sales
tax, then he is personally liable under G.S. 105-253 for the sales taxes collected but not paid to the State.
ISSUE
The issue considered by the Board upon administrative review of this matter is stated as follows:
Is the Taxpayer the responsible corporate officer of the corporation and personally liable under N.C.G.S. 105-253 for sales or
use tax for the periods November through December 1995, April 1996 through March 1997, June through July 1997, September 1997
through January 1998, March through April 1998, and July through August 1998?
EVIDENCE
The evidence submitted to the Assistant Secretary and included in the record for the Board's review is stated listed as follows:
1. Memorandum dated August 20, 1999 from the Secretary of Revenue to the Assistant Secretary of Revenue,
designated Exhibit E-1.
2. The corporation's November 1995 sales and use tax return, designated as Exhibit E-2.
3. Notice of Sales and Use Tax Assessment against the corporation dated May 25, 1998 for November 1995,
designated Exhibit E-3.
4. Letter dated June 10, 1998 from the Taxpayer's attorney to a Revenue Officer, designated Exhibit E-4.
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1842
5. Letter dated July 22, 1999 from the Taxpayer's attorney to a Revenue Officer and the following attachments:
6. Copy of complaint against Penny Jenkins.
7. Copy of Form RO-1063, Collection Information Statement for Businesses.
8. Copy of 1997 U.S. Corporation Income Tax Return, designated Exhibit E-5, E-5a, E-5b, and E-5c, respectively.
9. Notice of Sales Tax Penalty Assessment against the corporation dated July 27, 1998 for November 1995, designated
Exhibit E-6.
10. Letter dated August 16, 1999 from the Sales and Use Tax Division (Division) to the Taxpayer's attorney, designated
Exhibit E-7.
11. Final Notice of Tax Assessment Sales and Use Tax against the corporation dated September 27, 1998 for November
1995, designated Exhibit E-8.
12. Notice of Sales and Use Tax Assessment against Taxpayer as President of the Corporation dated October 15, 1999
for November 1995, designated Exhibit E-9.
13. Letter dated November 8, 1999 from the Taxpayer's attorney to the Division, designated Exhibit E-10.
14. Letter dated November 17, 1999 from the Division to the Taxpayer's attorney, designated Exhibit E-11.
15. Letter dated December 15, 1999 from the Taxpayer's attorney to the Division, designated Exhibit E-12.
16. Letter dated December 20, 1999 from the Division to the Taxpayer's attorney, designated Exhibit E-13.
17. Letter dated January 13, 2000 from the Taxpayer's attorney to the Division, designated Exhibit E-14.
18. Annual Report for Business Corporations received on December 11, 1998 by the Secretary of State, designated
Exhibit E-15.
19. Annual Report dated December 20, 1996 filed with the Secretary of State, designated Exhibit E-16.
20. Notice of Tax Assessment dated March 11, 2000 for November 1995, designated Exhibit E-17.
21. Letter dated March 3, 2000 from the Assistant Secretary of Revenue to the Taxpayer's attorney, designated Exhibit
E-18.
22. Letter dated March 14, 2000 from the Taxpayer's attorney to the Assistant Secretary of Revenue, designated Exhibit
E-19.
23. Letter dated March 15, 2000 from the Assistant Secretary of Revenue to the Taxpayer's attorney, designated Exhibit
E-20.
24. Letter dated June 14, 2000 from the Assistant Secretary of Revenue to the Taxpayer's attorney, designated Exhibit
E-21.
25. Memorandum dated September 15, 2000 from the Division to the Assistant Secretary of Revenue, designated
Exhibit E-22.
26. Application of Extension of Time to file the Corporate Franchise and Income Tax Return, for 1998 for Dependable
Housing, Incorporated, designated Exhibit E-23.
27. 1996 Corporation Franchise and Income Tax Return for Dependable Housing, Incorporated, designated Exhibit E-
24.
28. 1997 Corporate Franchise and Income Tax Return for Dependable Housing, I Incorporated, designated Exhibit E-
25.
29. Sales and Use Tax returns filed by Dependable Housing, Incorporated for periods November 1995 through August
1998, designated Exhibit E-26.
30. Notices of Sales and Use Tax Assessments against Dependable Housing, Incorporated for the periods November
through December 1995, April 1996 through March 1997, June through July 1997, September 1997 through January
1998, March through April 1998, and July through August 1998, designated Exhibit E-27.
31. Notices of Sales and Use Tax Penalty Assessments against Dependable Housing, Incorporated, for the periods
November through December 1995, April 1996 through March 1997, October 1997 through January 1998 and
March 1998, designated Exhibit E-28.
32. Final Notices of Tax Assessment Sales and Use against Dependable Housing, Incorporated, for the periods of
November through December 1995, April 1996 through March 1997, June through July 1997, September 1997
through January 1998, March through April 1998, and July through August 1998, designated Exhibit E-29.
33. Notices of Sales and Use Tax Assessment against Richard M. Pearman, Jr., President of Dependable Housing,
Incorporated, for the periods of November through December 1995, April 1996 through March 1997, June through
July 1997, September 1997 through January 1998, March through April 1998, and July through August 1998,
designated Exhibit E-30.
34. Final Notices of Tax Assessment Sales and Use against Richard M. Pearman, Jr., President of Dependable Housing,
Incorporated, for the periods of December 1995, April 1996 through March 1997, June through July 1997,
September 1997 through January 1998, March through April 1998, and July through August 1998, designated
Exhibit E-31.
35. Letter dated September 12, 2000 from the Assistant Secretary of Revenue to the Taxpayer's attorney, designated
Exhibit S-1.
36. Letter dated October 20, 2000, from the Taxpayer's attorney to the Assistant Secretary of Revenue, designated
Exhibit T-1.
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1843
FINDINGS OF FACT
The Board reviewed the following findings of fact in the Assistant Secretary's decision regarding this matter:
(1) The Taxpayer was the president of Dependable Housing, Incorporated, trading as Westwood Homes, a North
Carolina corporation engaged in the business of selling manufactured housing at retail.
(2) The corporation filed sales and use tax returns for the periods in question, reporting tax due, but sent in the reports
without remittance of tax.
(3) The corporation was assessed tax, penalty and interest for the relevant periods.
(4) The corporation did not protest the assessments for the relevant periods and the assessments against the corporation
became final and conclusive on September 27, 1998.
(5) The Taxpayer signed the North Carolina Corporate Franchise and Income Tax Returns for the tax years1996 and
1997 as corporate president.
(6) The corporation's North Carolina Corporate Franchise and Income Tax Returns for 1996 and 1997 both indicated
sales tax due at both year-ends in the amount $19,434 and $18,914, respectively.
(7) The sales and use tax returns were signed by Cindy Murray, as bookkeeper, for periods in 1995, 1996 and 1997.
Ms. Murray is the Taxpayer's assistant at his law firm.
(8) Beginning in January 1998, the sales tax returns were signed by C. L. Clodfelter, as bookkeeper, through the balance
of the assessed periods.
(9) The corporation ceased conducting business in January 1999.
(10) The corporation was a small, closely held, family-owned company with no more than two shareholders at any one
time. Taxpayer originally incorporated the company and remained its principal executive officer until it ceased
conducting business, including the assessed periods. Since there was no senior financial corporate officer, Taxpayer
as chief executive officer was legally responsible for filing tax returns and paying all company debts.
(11) In October 1999, assessments were imposed against the Taxpayer personally pursuant to N.C.G.S. 105-253 as the
responsible officer for the corporation.
(12) Notices of Proposed Assessment were mailed to the Taxpayer on October 15, 1999.
CONCLUSIONS OF LAW
The Board reviewed the following conclusions of law made by the Assistant Secretary in his decision regarding this matter:
(1) The liability of a responsible officer is satisfied upon the timely remittance of the tax by the corporation or the
limited liability company.
(2) If the tax remains unpaid after it is due and payable, the Secretary of Revenue may assess the tax against and collect
the tax from any responsible officer in accordance with the procedures for assessing and collecting tax from a
taxpayer.
(3) As used in N.C.G.S. 105-253, the term responsible officer means the president and treasurer of a corporation.
(4) Since the rules of evidence do not apply to an administrative tax hearing conducted under N.C.G.S. 105-241.1(c),
Taxpayer's letter of July 22, 1999, is properly in the record. The letter, from the Taxpayer's attorney to the
Department, seeks a compromise of the November 1995 assessment.
(5) On the line designated "Total Amount Due State and County" on the return for each of the assessed periods, the
amount of tax due was entered. This indicates that the person preparing the return had determined that there was
sales tax due to the State of North Carolina.
(6) In order for the sales tax liabilities to have been reported on both the monthly sales tax returns and the corresponding
corporate franchise and income tax returns, the tax must have been collected, as that is the only way the liability
could have been incurred and properly reported in the corporation's accounting records.
(7) Taxpayer has produced no documentation suggesting that sales tax was not collected as reported on the sales tax
returns and as noted on the corporate income and franchise returns.
(8) Pursuant to N.C.G.S. 105-241.1 (a), the assessments have been properly based upon financial information prepared
by and obtained from the corporation, and constitute the best information available.
(9) N.C.G.S. 105-164.4, which levies tax on the sale of manufactured homes, imposes the tax on the retailer, not the
lender or other third parties.
(10) Failure to make reasonable and prudent inquiry into the proper procedures for remittance of sales tax or to determine
if the tax were paid by another person fails the test of "reasonable care" required in N.C.G.S. 105-253.
(11) The Taxpayer constituted a responsible officer for sales tax liability incurred by this corporation because he should
have known in the exercise of reasonable care that sales tax was being collected by the corporation on retail sales of
manufactured homes and not being remitted to the State.
(12) The Taxpayer, as president of the corporation, is a responsible officer of the corporation under N.C.G.S. 105-253.
The record shows that sales tax was collected by the corporation on the retail sales of manufactured homes and the
Taxpayer has produced no evidence to show otherwise.
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1844
(13) The Taxpayer is personally liable under N.C.G.S. 105-253(b)(1) for the sales taxes collected by the corporation and
not remitted to the State.
(14) The Taxpayer is personally liable for the sales taxes pursuant to N.C.G.S. 105-253(b)(2), as he did not exercise
reasonable care with regard to their collection and remittance.
(15) Notices of Assessment for the periods of November 1995, December 1995, April 1996 through March 1997, June
1997 through July 1997, September 1997 through January 1998, March through April 1998, and July through
August 1998, were properly issued pursuant to N.C.G.S. 105-241.1.
(16) The Taxpayer timely protested his Notices of Proposed Assessment dated October 15, 1999.
DECISION
The Taxpayer was the president of Dependable Housing, Inc., trading as Westwood Homes, a North Carolina corporation
engaged in the business of selling manufactured housing at retail. The corporation filed sales and use tax returns for the periods in
question, reporting sales tax due, but sent the returns without remittance of the tax. Although sales tax assessment notices were sent to
the corporation, it did not protest any of the assessments so the Department of Revenue billed the assessments as final. The
corporation ceased conducting business in January 1999. In October 1999, an assessment was made against the Taxpayer personally
pursuant to N.C.G.S. 105-253 as the responsible corporate officer for the corporation. As stated in the Assistant's Secretary's final
decision the Department argued that the Taxpayer, as the president of the corporation, is responsible for the sales taxes collected but
not paid to the State under both subparagraphs 1 and 2 of N.C.G.S. 105-253 (b).
N.C.G.S. 105-253 reads in pertinent part that:
"(b) Each responsible officer is personally and individually liable for all of the following:
(1) All sales and use taxes collected by a corporation or limited liability company upon its taxable transactions.
(2) All sales and use taxes due upon taxable transactions of a corporation or limited liability company but upon
which it failed to collect the tax, but only if the person knew, or in the exercise of reasonable care should
have known, that tax was not being collected."
The scope of administrative review for petitions filed with the Tax Review Board is governed by G.S. 105-241.2(b2). After
the Board conducts a hearing this statute provides in pertinent part:
(b2). "The Board shall confirm, modify, reverse, reduce or
increase the assessment or decision of the Secretary."
The Board having conducted an administrative hearing, and having considered the Petition, the brief, the arguments and the
record in this matter, concludes that the findings of fact contained in the Assistant Secretary's decision were fully supported by
competent evidence in the record; that the conclusions of law made by the Assistant Secretary were fully supported by the findings of
fact; and the Assistant Secretary's final decision sustaining the proposed assessment of additional sales and use tax was fully supported
by the conclusions of law.
WHEREFORE, THE TAX REVIEW BOARD ORDERS that the Assistant Secretary's final decision sustaining the
proposed assessment of sales and use tax for the periods of November through December 1995, April 1996 through March 1997, June
through July 1997, September 1997 through January 1998, March through April 1998, and July through August 1998 be and is hereby
Confirmed.
Made and entered into the 19th day of December 2002.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1845
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Unauthorized )
Substance Tax dated March 16, 2001 by )
The Secretary of Revenue of North Carolina )
) ADMINISTRATIVE DECISION
) NUMBER: 397
)
vs. )
)
Farelia Glover Fleming, )
Taxpayer )
This Matter was heard before the Tax Review Board (hereinafter "Board") in the City of Raleigh, North Carolina, in the
office of the State Treasurer, on Thursday, September 5, 2002, upon Farelia Glover Fleming's (hereinafter "Taxpayer") petition for
administrative review of the Final Decision of Eugene J. Cella, Assistant Secretary for Administrative Hearings, entered on December
5, 2001, sustaining the assessment of unauthorized substance tax in the amount of $29,000.00, plus interest as required by law.
Chairman Richard H. Moore, State Treasurer, presided over the hearing with Jo Anne Sanford, Chair, Utilities Commission
and duly appointed member, Noel L. Allen, Attorney at Law participating.
Mr. and Mrs. Fleming appeared at the hearing. David J. Adinolfi, II, Associate Attorney General, represented the North
Carolina Secretary of Revenue at the hearing.
STATEMENT OF FACTS AND CASE
Between April 19, 2000 and January 12, 2001, the Taxpayer obtained 50 hydrocodone prescriptions from numerous doctors
and a registered nurse and had them filled a various pharmacies. Investigators interviewed ten of the doctors involved in this matter
and stated that the Taxpayer failed to inform them that she was also being prescribed the Schedule III narcotic hydrocodone by other
physicians. Based upon the investigation, 36 of the prescriptions, totaling 1,416 dosages were deemed fraudulent and therefore
subject to the unauthorized substance tax. On March 16, 2001, the Department of Revenue issued an unauthorized substance tax
assessment against the Taxpayer.
Taxpayer appeals from an adverse decision of the Assistant Secretary of Revenue entered on December 5, 2001 sustaining a
proposed assessment of an unauthorized substance tax in the amount of $29,000.00 together with interest as allowed by law. The
Assistant Secretary, under the provisions of G.S. 105-260.1, scheduled a hearing in this matter. The Taxpayer and her husband, who
is an attorney, appeared at the hearing before the Assistant Secretary. Also appearing at the hearing was Taxpayer's physician, Dr.
Rudolph J. Maier.
At the hearing before the Assistant Secretary, the Taxpayer's primary argument is that she obtained the pills to combat the
extreme chronic pain she suffers from due to migraines and fybromyalgia. Mr. Fleming argued that his wife is essentially
unemployable due to her illness, and as no assets, and that the Department of Revenue should accept her offer in compromise. After
the hearing, the Assistant Secretary issued a final decision that affirmed the assessment in the amount of $29,000.00 and waived the
$11,600 penalty imposed against the Taxpayer.
In the Petition filed with the Board, the Taxpayer argues that the intent of the Unauthorized Substance Tax is to combat drug
trafficking by levying a punitive tax burden upon drug dealers. Since she is not a drug dealer, the Taxpayer contends that the
assessment should be dismissed. The Taxpayer further argues that she has a limited earning capacity due to her various health
problems and has requested the Department of Revenue to accept her $2,100 offer in compromise or cancel the assessment.
ISSUES:
1. Did the Taxpayer have actual/or constructive possession of hydrocodone without proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1846
FINDINGS OF FACT
After considering the petition, brief, record and considering the arguments presented by the parties, the Board makes the
following finding of fact:
1. An Assessment of Unauthorized Substance Tax was made against the Taxpayer on March 16, 2001, in the sum of
$29,000.00 tax, $11,600.00 penalty and $1,333.62 interest, for a total proposed liability of $41,933.62, based upon
the unlawful possession of 1,416 dosages of hydrocodone for the period at issue.
2. The Taxpayer made a timely objection and application for hearing.
3. The Taxpayer suffers from medical conditions that cause her to have chronic pain.
4. The Assistant Secretary, after conducting the hearing, sustained the proposed tax assessment together with interest
as allowed by law, but waived the penalty.
5. The Taxpayer filed a timely notice of intent and petition for administrative review with the Board.
CONCLUSIONS OF LAW
The Board reviewed the following conclusions of law made by the Assistant Secretary in his decision regarding this matter:
1. An assessment of tax is presumed to be correct.
2. The burden is upon the Taxpayer who objects to an assessment to overcome that presumption.
3. Pursuant to G.S. 105-113.109, a dealer who actually or constructively possesses an unauthorized substance in this
State, upon which the tax has not been paid, is required to purchase and affix the appropriate stamp. Tax is due from
the dealer at the time the dealer comes into possession of the unauthorized substance.
4. The Taxpayer, as a matter of law, is not a dealer as that term is defined in G.S. 105-113.109 and is therefore not
liable for the proposed assessment issued against her on March 16, 2001, in the amount of $29,000 tax, together with
interest.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by G.S. 105-241.2(b2). After the Board
conducts a hearing, this statute provides in pertinent part:
(b2). "The Board shall confirm, modify, reverse, reduce or
increase the assessment or decision of the Secretary."
The Board having conducted an administrative hearing in this matter, and having considered the petition, the brief, the record
and final decision, concludes that the findings of fact contained in the Assistant Secretary's final decision are not supported by
competent evidence in the record; that based upon the findings of fact, the Assistant Secretary's conclusions of law were not fully
supported by the findings of fact; therefore the Assistant Secretary's final decision should be reversed.
WHEREFORE, THE TAX REVIEW BOARD ORDERS that the Assistant Secretary final decision
sustaining the proposed tax assessment together with interest against the Taxpayer be and is hereby
REVERSED.
Made and entered into the 19th day of December 2002.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1847
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Unauthorized )
Substance Tax dated July24, 2001 by )
The Secretary of Revenue of North Carolina )
) ADMINISTRATIVE DECISION
) NUMBER: 398
)
vs. )
)
James M. Barbee, )
Taxpayer )
This Matter was heard before the Tax Review Board (hereinafter "Board") in the City of Raleigh, North Carolina, in the
office of the State Treasurer, on Thursday, September 5, 2002, upon James M. Barbee's (hereinafter "Taxpayer") petition for
administrative review of the Final Decision of Eugene J. Cella, Assistant Secretary for Administrative Hearings entered on April 24,
2002, sustaining the assessment of unauthorized substance tax for the period of July 24, 2001.
Chairman Richard H. Moore, State Treasurer, presided over the hearing with Jo Anne Sanford, Chair, Utilities Commission
and duly appointed member, Noel L. Allen, Attorney at Law participating.
The Taxpayer and his attorney, George Hughes appeared at the hearing. David J. Adinolfi, II, Associate Attorney General,
appeared at the hearing for the North Carolina Secretary of Revenue at the hearing.
Pursuant to G.S. 105-113.111(a) and G.S. 105-241.1, a Notice of Unauthorized Substance Tax Assessment was issued to the
Taxpayer on July 24, 2001. The notice related to a proposed assessment of tax, penalty and interest in the total amount of $38,052.00
based upon the possession of 27,180 grams of marijuana. The assessment alleged that on February 25, 2001, the Taxpayer possessed
a total of 27,180 grams of marijuana. After conducting a hearing, the Assistant Secretary entered his decision sustaining the proposed
assessment against the Taxpayer. Thereafter, the Taxpayer, through counsel, timely filed a notice and petition for administrative
review of the Assistant Secretary's Final Decision with the Tax Review Board.
ISSUES
The issues considered by the Board upon administrative review of this matter are stated as follows:
1. Did the Taxpayer have actual and/or constructive possession of marijuana without the proper stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance tax?
EVIDENCE
The evidence submitted to the Assistant Secretary and included in the record for the Board's review is stated as follows:
1. US-1, Form BD-10, "Notice of Unauthorized Substance Tax Assessment," dated July 24, 2001.
2. US-2, Letter from the Taxpayer's attorney, dated August 17, 2001, objecting to the assessment and requesting a
hearing.
3. US-3, Letter to the Taxpayer's attorney, dated August 29, 2001, advising him that his client's Administrative Tax
Hearing was scheduled for November 20, 2001.
4. US-4, Forms BD-4, "Report of Arrest and/or Seizure Involving Nontaxpaid (Unstamped) Controlled Substances,"
naming the Taxpayer as the possessor of the controlled substance.
5. US-5, The Montgomery County Sheriff's Office incident report, including the voluntary statement of the Taxpayer.
6. US-6, Memorandum from E. Norris Tolson, Secretary of Revenue, dated May 16, 2001, delegating to Eugene J.
Cella, Assistant Secretary of Administrative Hearings, the authority to hold any hearing required or allowed under
Chapter 105 of the North Carolina General Statutes.
FINDINGS OF FACT
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1848
The Board, after conducting a hearing in this matter and after reviewing the petition, the final decision and the record from
the proceeding before the Assistant Secretary, makes the following findings of fact:
1. The Board has jurisdiction over the parties and subject matter of this appeal.
2. The Taxpayer filed a timely notice of intent and petition for administrative review of the Assistant Secretary's final
decision that was entered on April 24, 2002.
3. The record does not contain sufficient evidence to show that the Taxpayer possessed 29,221 grams of marijuana as
set for in the proposed assessment of on July 24, 2001 and there is no evidence to show that the Taxpayer purchased
and possessed five pounds of marijuana every two weeks during the six months prior to July 13, 2001.
4. For the period at issue, the Taxpayer possessed 1958.3 grams of marijuana.
5. The proposed assessment of unauthorized substance tax, issued on July 24, 2001, in the sum of $102,273.50 tax,
$40,909.40 penalty and $681.82 interest, for a total proposed liability of $143,864.72, is not valid.
6. No tax stamps were purchased for or affixed to the 1,958.3 grams of marijuana as required by law.
CONCLUSIONS OF LAW
Based upon the foregoing findings of fact, the Board makes the following conclusions of law:
1. Even though the assessment of tax in this matter is presumed to be correct, the Taxpayer may overcome the
presumption by producing any evidence showing that he did not possess 29,221 grams of marijuana at the time of
his arrest. Based upon the evidence, the Taxpayer has overcome the presumption by producing evidence to show
that he only possessed 1,958.3 grams of marijuana for the period at issue.
2. G.S. 105-113.106(3) defines a dealer as "a person who actually or constructively possesses more than 42.5 grams of
marijuana, seven or more grams of any other controlled substance that is sold by weight, or 10 or more dosage units
of any other controlled substance that is not sold by weight."
3. Pursuant to G.S. 105-113.109, a tax is imposed against a dealer who possesses an authorized substance in this State
upon which the tax has not been paid, as evidence of a stamp.
4. The Taxpayer is a dealer since he possessed 1,958.3 grams of marijuana for the period at issue upon which the tax
had not been paid.
5. The Taxpayer is liable for the tax, penalty and interest until fully paid for the possession of 1,958.3 grams of
marijuana. and the proposed assessment against the Taxpayer should be adjusted accordingly.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by G.S. 105-241.2(b2). After
the Board conducts a hearing, this statute provides in pertinent part:
(b2). "The Board shall confirm, modify, reverse, reduce or
increase the assessment or decision of the Secretary."
The Board having conducted a hearing in this matter and having considered the petition, the brief, the final decision and the
documents of record, concludes that the Assistant Secretary did not properly determine that the Taxpayer possessed 27,180 grams of
marijuana. This Board determines, based upon the record, that the Taxpayer only possessed 1,958.3 grams of an unauthorized
substance for the period at issue and that the proposed assessment should be amended to reflect a tax due, plus penalty and interest
based upon Taxpayer's possession of 1,958.3 grams of marijuana. Thus, the Board reduces the tax assessment levied against the
Taxpayer since he did not possess 27,180 grams of marijuana for the period at issue.
WHEREFORE, THE TAX REVIEW BOARD ORDERS that proposed assessment be and is hereby reduced to reflect the
appropriate tax plus penalty and interest as allowed by law based upon Taxpayer's possession of 1,958.3 grams of marijuana for the
period at issue.
Made and entered into the 19th day of December 2002.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1849
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Unauthorized )
Substance Tax dated May 10, 2000 by )
The Secretary of Revenue of North Carolina )
) ADMINISTRATIVE DECISION
) NUMBER: 399
)
vs. )
)
Troy Ellington Stainback, )
Taxpayer )
This Matter was heard before the Tax Review Board (hereinafter "Board") in the City of Raleigh, North Carolina, in the
office of the State Treasurer, on Wednesday, June 12, 2002, upon Troy Ellington Stainback's (hereinafter "Taxpayer") petition for
administrative review of the Final Decision of Eugene J. Cella, Assistant Secretary for Administrative Hearings, of the North Carolina
Department of Revenue entered on October 10, 2001, sustaining the assessment of unauthorized substance tax for the period of May
10, 2000.
Chairman Richard H. Moore, State Treasurer, presided over the hearing with Jo Anne Sanford, Chair, Utilities Commission
and duly appointed member, Noel L. Allen, Attorney at Law participating.
Attorney Michael S. Petty appeared at the hearing on behalf of the Taxpayer. David J. Adinolfi, II, Assistant Attorney
General appeared at the hearing on behalf of the Secretary of Revenue.
Upon calling this matter for hearing, counsel for the parties advised the Board of their settlement discussion regarding the
proposed assessment. Since all parties where present, the Board proceeded with the hearing and considered the petition, the brief, the
final decision, the documents of record, and the arguments presented, but delayed, at counsel's request, entry of the final decision until
further notice regarding the settlement. The Board, having received no notice of a settlement in the matter, renders the following
decision.
Pursuant to N.C. Gen. Stat. § 105-113.111(a) and N.C. Gen. Stat. § 105-241.1, a Notice of Unauthorized Substance Tax
Assessment was issued to the Taxpayer on May 10, 2000. The notice related to a proposed assessment of tax, penalty and interest in
the total amount of $35,166.67 based upon the possession of 500 grams of cocaine. The assessment alleged that on May 4, 2000, the
Taxpayer was in unauthorized possession of 500 grams of cocaine that did not have the proper tax stamps affixed thereto. The
Taxpayer objected to the proposed assessment and requested a hearing before Secretary of Revenue. After conducting a hearing, the
Assistant Secretary entered his decision sustaining the proposed assessment against the Taxpayer. Thereafter, the Taxpayer, through
counsel, timely filed a notice and petition for administrative review of the Assistant Secretary's Final Decision with the Tax Review
Board.
ISSUES
The issues considered by the Board upon administrative review of this matter are stated as follows:
1. Did the Taxpayer have actual and/or constructive possession of cocaine without the proper stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
The evidence submitted to the Assistant Secretary and included in the record for the Board's review is stated as follows:
1. US-1 Form BD-10, "Notice of Unauthorized Substance Tax Assessment," dated May 10, 2000.
2. US-2 Letter from the Taxpayer's attorney, dated July 20, 2000, requesting a hearing.
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1850
3. US-3 Letter to the Taxpayer's attorney, dated August 8, 2000, informing him that his client's Administrative Tax
Hearing was scheduled for September 29, 2000.
4. US-4 Letter from the Taxpayer's attorney, dated September 26, 2000, requesting a continuance.
5. US-5 Form BD-4, "Report of Arrest and/or Seizure Involving Nontaxpaid (Unstamped) Controlled Substances,"
which names the Taxpayer as the possessor of the controlled substances.
6. US-6 Incident report by Wilson County Sheriff's Office, including suspect statements and the SBI lab report.
FINDINGS OF FACT
The Board reviewed the following findings of fact in the Assistant Secretary's decision in this matter:
1. On May 16, 2001, E. Norris Tolson, Secretary of Revenue, delegated to Eugene J. Cella, Assistant Secretary of
Administrative Hearings, the authority to hold any hearing required or allowed under Chapter 105 of the North
Carolina General Statutes.
2. Assessment of Unauthorized Substance Tax was made against the Taxpayer on May 10, 2000, in the sum of
$25,000.00 tax, $10,000.00 penalty and $166.67 interest, for a total proposed liability of $35,166.67, based on
possession of 500 grams of cocaine.
3. The Taxpayer made a timely objection and application for hearing.
4. The State Bureau of Investigation's lab report stated the evidence submitted for analysis was 517.2 grams of cocaine.
5. The Taxpayer was the individual who wanted to buy the cocaine and he enlisted the services of two others to do so.
Further, the Taxpayer supplied the money, albeit counterfeit, to purchase the cocaine.
6. By enlisting the services of two others to obtain the cocaine, they both became the agents of the Taxpayer. One of
those agents clearly took possession of the cocaine. He was able to walk, then run with the cocaine, before
eventually throwing it under a parked bus. All of these acts are consistent with having possession and control of the
substance.
7. On May 4, 2000, the Taxpayer had constructive possession of 500 grams of cocaine by virtue of his agent having
actual possession of the same.
8. The cocaine used in the "reversal" drug deal has been previously taxed, but the Unauthorized Substances Tax
Division's records reflect that the taxes on this 500 grams of cocaine has not previously been collected.
CONCLUSIONS OF LAW
The Board reviewed the following conclusions of law made by the Assistant Secretary in his decision regarding this matter:
1. An assessment of tax is presumed to be correct.
2. The burden is upon Taxpayer who objects to an assessment to overcome that presumption, and this burden was not
met.
3. On May 4, 2000, the Taxpayer possessed 500 grams of cocaine and was therefore a dealer as that term is defined in
N.C. Gen. Stat. 105-113.106.
4. The Taxpayer is liable for $25,000.00 tax, $10,000.00 penalty and interest until date of full payment.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. 105-
241.2(b2). After the Board conducts a hearing, this statute provides in pertinent part:
(b2). "The Board shall confirm, modify, reverse, reduce or
increase the assessment or decision of the Secretary."
Pursuant to N.C. Gen. Stat. 105-241.1(a), a proposed tax assessment is presumed to be correct and the burden is on the
Taxpayer to rebut that presumption. Since the Taxpayer failed to provide any evidence to overcome the presumption, the Assistant
Secretary properly determined that the Taxpayer possessed an unauthorized substance on May 4, 2000.
The Board having conducted a hearing in this matter and having considered the petition, the brief, the final decision and the
documents of record, concludes that the Assistant Secretary properly determined that the Taxpayer possessed an unauthorized
substance and was a dealer as that term is defined in N.C. Gen. Stat. 105-113.106(3) and is therefore liable for the assessment imposed
against him.
WHEREFORE, THE TAX REVIEW BOARD ORDERS that the tax assessment levied against the Taxpayer be and is
hereby Confirmed.
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1851
Made and entered into the 15th day of January 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commis sion
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1852
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Unauthorized )
Substance Tax dated September 29, 2000 by )
The Secretary of Revenue of North Carolina )
) ADMINISTRATIVE DECISION
) NUMBER: 400
)
vs. )
)
Kelly Sue Locklear, )
Taxpayer )
This Matter was heard before the Tax Review Board (hereinafter "Board") in the City of Raleigh, North Carolina, in the
office of the State Treasurer, on Thursday, September 5, 2002, upon Kelly Sue Locklear's (hereinafter "Taxpayer") petition for
administrative review of the Final Decision of Eugene J. Cella, Assistant Secretary for Administrative Hearings, entered on September
10, 2001, sustaining the assessment of unauthorized substance tax for the period of September 29, 2000.
Chairman Richard H. Moore, State Treasurer, presided over the hearing with Jo Anne Sanford, Chair, Utilities Commission
and duly appointed member, Noel L. Allen, Attorney at Law participating.
Thomas W. Pleasant, counsel for the Taxpayer appeared at the hearing. David J. Adinolfi, II, Associate Attorney General,
appeared at the hearing on behalf of the North Carolina Secretary of Revenue.
A Notice of Unauthorized Substance Tax Assessment was issued to the Taxpayer, assessing $59,927.00 tax, $23,970.80
penalty and 399.51 interest, for a total proposed liability of $84,297.31. The assessment alleged that on September 29, 2000, the
Taxpayer was in unauthorized possession of 17,122 grams of marijuana without the proper tax stamps affixed to the substance. The
Taxpayer protested the assessment and requested a hearing before the Secretary of Revenue. The Taxpayer was not present or
represented at the August 24, 2001 hearing before the Assistant Secretary and no evidence was offered at the hearing on behalf of the
Taxpayer. After conducting the hearing, the Assistant Secretary issued a final decision on September 10, 2001 that sustained the
assessment against the Taxpayer. Taxpayer then filed a notice of intent and petition for administrative review with the Tax Review
Board.
ISSUES
The issues considered by the Board upon administrative review of this matter are stated as follows:
1. Did the Taxpayer have actual and/or constructive possession of marijuana without the proper stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance tax?
FINDINGS OF FACT
The Board reviewed the following findings of fact in the Assistant Secretary's final decision that was issued in this matter:
1. Assessment of Unauthorized Substance Tax was made against the Taxpayer on September 29, 2000, in the sum of
$59,927.00 tax, $23,970.80 penalty and $399.51 interest, for a total proposed liability of $84,297.31, based on
possession of 17,122 grams of marijuana.
2. The Taxpayer made a timely objection and application for hearing.
3. Neither the Taxpayer nor anyone representing the Taxpayer appeared at the hearing to offer arguments or evidence
in support of the objections to the assessment.
4. Per the State Bureau of Investigation's lab analysis, the weight of the marijuana is 17,191.44 grams.
5. On September 29, 2000, the Taxpayer possessed 17,191.44 grams of marijuana.
6. No tax stamps were purchased for or affixed to the marijuana as required by law.
CONCLUSIONS OF LAW
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1853
The Board reviewed the following conclusions of law made by the Assistant Secretary in his decision regarding this matter:
1. An assessment of tax is presumed to be correct.
2. The burden is upon the Taxpayer who objects to an assessment to overcome that presumption.
3. The Taxpayer possessed 17,191.44 grams of marijuana on September 29, 2000, and was therefore a dealer as that
term is defined in G.S. 105-113.106(3).
4. The Taxpayer is liable for $59,927.00 tax, $23,970.80 penalty and interest until date of full payment, based upon the
17,122 grams specified in the Notice dated September 29, 2000.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by G.S. 105-241.2(b2). After the Board
conducts a hearing, this statute provides in pertinent part:
(b2). "The Board shall confirm, modify, reverse, reduce or
increase the assessment or decision of the Secretary."
Pursuant to G.S. 105-241.1(a), a proposed tax assessment is presumed to be correct and the burden is on the Taxpayer to
rebut that presumption. From a review of the record, the Taxpayer failed to provide any evidence to overcome the presumption.
Thus, the Tax Review Board having conducted an administrative hearing in this matter and having considered the petition, the briefs,
the documents of record, and the Assistant Secretary's final decision, concludes that the findings of fact made by the Assistant
Secretary were supported by competent evidence in the record; that based upon the findings of fact, the Assistant Secretary's
conclusions of law were fully supported by the findings of fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE TAX REVIEW BOARD ORDERS AND DECREES that the Assistant Secretary's final decision,
entered on September 10, 2001 in this matter, be and is hereby confirmed in every respect.
Made and entered into the 19th day of December 2002.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1854
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Additional )
Income Tax for the Taxable Year 2000 by )
The Secretary of Revenue of the State of )
North Carolina ) ADMINISTRATIVE DECISION
) NUMBER: 401
)
vs. )
)
Frank L. and Linda J. Esau, )
Taxpayers )
THIS MATTER is before the Regular Tax Review Board (hereinafter "Regular Board") upon petition for administrative
review filed by Frank L. and Linda J. Esau (hereinafter "Taxpayers") regarding the Final Decision of Eugene J. Cella, Assistant
Secretary for Administrative Hearings of the North Carolina Department of Revenue (hereinafter "Assistant Secretary"), sustaining the
proposed assessment of additional individual income tax liability for taxable year 2000.
Pursuant to G.S. 105-241.1, an assessment proposing additional tax, penalty and accrued interest totaling $593.22 for taxable
year 2000 was mailed to the Taxpayers on December 13, 2001. The Taxpayers protested the assessment and filed a request for an
administrative hearing. After conducting a hearing, the Assistant Secretary of Revenue entered a Final Decision, on August 29, 2002,
that sustained the proposed assessment against the Taxpayers for tax year 2000, but the tax liability was modified to allow credit for
the North Carolina income tax withheld. Pursuant to G.S. 105-241.2, the Taxpayers filed a notice of intent and petition for
administrative review of the Assistant Secretary's Final Decision with the Tax Review Board.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, the records and documents transmitted by the North
Carolina Secretary of Revenue pertaining to this matter; and it appearing to the Board that the Taxpayers' petition should be dismissed
since the grounds and arguments upon which relief is sought have been repeatedly rejected by the Courts and are deemed lacking in
legal merit. Thus, the Board concludes that Taxpayers' petition for administrative review is frivolous and is filed for the purpose of
delay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Taxpayers' petition for administrative review be
and is hereby Dismissed.
Made and entered into the 4th day of February 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1855
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Additional )
Income Tax for the Taxable Year 2000 by )
The Secretary of Revenue of the State of )
North Carolina ) ADMINISTRATIVE DECISION
) NUMBER: 402
)
vs. )
)
James and Melanie Dunham, )
Taxpayers )
THIS MATTER is before the Regular Tax Review Board (hereinafter "Regular Board") upon petition for administrative
review filed by James B. and Melanie Dunham (hereinafter "Taxpayers") regarding the Final Decision of Eugene J. Cella, Assistant
Secretary for Administrative Hearings of the North Carolina Department of Revenue (hereinafter "Assistant Secretary"), sustaining the
proposed assessment of additional individual income tax liability for taxable year 2000.
Pursuant to G.S. 105-241.1, an assessment proposing additional tax, penalty and accrued interest totaling $1,733.09 for
taxable year 2000 was mailed to the Taxpayers on December 13, 2001. The Taxpayers protested the assessment and filed a request for
an administrative hearing. After conducting a hearing, the Assistant Secretary of Revenue entered a Final Decision, on June 25, 2002,
sustaining the proposed assessment against the Taxpayers for individual income tax liability, plus penalty and accrued interest in the
total amount of $1,769.87 for taxable year 2000. Pursuant to G.S. 105-241.2, the Taxpayers filed a notice of intent and petition for
administrative review of the Assistant Secretary's Final Decision with the Tax Review Board.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, the records and documents transmitted by the North
Carolina Secretary of Revenue pertaining to this matter; and it appearing to the Board that the Taxpayers' petition should be dismissed
since the grounds and arguments upon which relief is sought have been repeatedly rejected by the Courts and are deemed lacking in
legal merit. Thus, the Board concludes that Taxpayers' petition for administrative review is frivolous and is filed for the purpose of
delay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Taxpayers' petition for review administrative be
and is hereby Dismissed.
Made and entered into the 3rd day of February 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1856
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Additional )
Income Tax for the Taxable Years 1999 and 2000 by )
The Secretary of Revenue of North Carolina )
) ADMINISTRATIVE DECISION
) NUMBER: 403
)
vs. )
)
Jerry T. Edmundson, )
Taxpayer )
THIS MATTER is before the Regular Tax Review Board (hereinafter "Regular Board") upon petition for administrative
review filed by Jerry T. Edmundson (hereinafter "Taxpayer") regarding the Final Decision of Eugene J. Cella, Assistant Secretary
for Administrative Hearings of the North Carolina Department of Revenue (hereinafter "Assistant Secretary"), sustaining the proposed
assessment of additional individual income tax liability for taxable years 1999 and 2000.
Pursuant to G.S. 105-241.1, assessments proposing additional tax, penalty and accrued interest totaling $796.00 for taxable
years 1999 and 2000 were mailed to the Taxpayer on December 13, 2001. The Taxpayer protested the assessments and filed a request
for hearing. After conducting a hearing, the Assistant Secretary of Revenue entered a Final Decision, on July 31, 2002, sustaining the
proposed assessments, plus penalty and accrued interest against the Taxpayer for individual income tax liability in the total amount of
$1,290.55 for taxable years 1999 and 2000. Pursuant to G.S. 105-241.2, the Taxpayer filed a notice of intent and petition for
administrative review of the Assistant Secretary's Final Decision with the Tax Review Board.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, the records and documents transmitted by the North
Carolina Secretary of Revenue pertaining to this matter; and it appearing to the Board that the Taxpayer's petition should be dismissed
since the grounds and arguments upon which relief is sought have been repeatedly rejected by the Courts and are deemed lacking in
legal merit. Thus, the Board concludes that Taxpayer's petition for administrative review is frivolous and is filed for the purpose of
delay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Taxpayer's petition for administrative review be
and is hereby Dismissed.
Made and entered into the 3rd day of February 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1857
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Additional )
Income Tax for the Taxable Years 1995 and 1996 by )
The Secretary of Revenue of North Carolina )
) ADMINISTRATIVE DECISION
) NUMBER: 404
)
vs. )
)
Michael W. May, )
Taxpayer )
THIS MATTER is before the Regular Tax Review Board (hereinafter "Regular Board") upon petition for administrative
review filed by Michael W. May (here inafter "Taxpayer") regarding the Final Decision of Eugene J. Cella, Assistant Secretary for
Administrative Hearings of the North Carolina Department of Revenue (hereinafter "Assistant Secretary"), sustaining the proposed
assessment of additional individual income tax liability for taxable years 1995 and 1996.
Pursuant to G.S. 105-241.1, assessments proposing additional tax, penalty and accrued interest totaling $17,522.88 for tax
year 1995, and $10,620.28, for tax year 1996 were mailed to the Taxpayer June 27, 2001. The Taxpayer protested the assessments
and filed a request for hearing. After conducting a hearing, the Assistant Secretary of Revenue entered a Final Decision, on June 18,
2002, sustaining the proposed assessments against the Taxpayer for individual income tax liability in the total amount of $18,469.09,
$10,157.52 for taxable year 1995 and $8,311.57 for taxable year 1996. Pursuant to G.S. 105-241.2, the Taxpayer filed a notice of
intent and petition for administrative review of the Assistant Secretary's Final Decision with the Tax Review Board.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, the records and documents transmitted by the North
Carolina Secretary of Revenue pertaining to this matter; and it appearing to the Board that the Taxpayer's petition should be dismissed
since the grounds and arguments upon which relief is sought have been repeatedly rejected by the Courts and are deemed lacking in
legal merit. Thus, the Board concludes that Taxpayer's petition for administrative review is frivolous and is filed for the purpose of
delay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Taxpayer's petition for administrative review be
and is hereby Dismissed.
Made and entered into the 3rd day of February 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1858
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Denial of Claims for Refund of Sales and )
Use Tax for the Periods of November 1, 1993 )
through June 30, 1996 and January 1, 1997 )
through August 21, 1999 by the Secretary of ) ADMINISTRATIVE DECISION
Revenue of the State of North Carolina ) NUMBER: 405
)
vs. )
)
Morton Buildings, Inc. )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter "Board") in the City of Raleigh, Wake County,
North Carolina, on Wednesday, December 18, 2002, upon a petition filed by Morton Buildings, Inc. (hereafter "Taxpayer") for
administrative review of the Final Decision of the Assistant Secretary of Revenue entered on 24 May 2002 denying refund claims of
sales and use taxes for the periods of November 1, 1993 through June 30, 1996 and January 1, 1997 through August 31, 1999.
Chairman Richard H. Moore, State Treasurer presided over the hearing with ex officio member Jo Anne Sanford, Chair,
Utilities Commission and duly appointed member, Noel L. Allen, Attorney at Law participating.
Attorneys Charles B. Neely, Jr., Nancy S. Rendleman and Abraham M. Stranger appeared at the hearing on behalf of the
Taxpayer. George W. Boylan, Special Deputy Attorney General, appeared at the hearing on behalf of the Secretary of Revenue.
STATEMENT OF FACTS
Morton Buildings, Inc. ("Taxpayer") is an Illinois corporation having its principal place of business in Morton, Illinois.
Taxpayer is engaged in the business of manufacturing and installing prefabricated timber frame metal-sheathed buildings for use by
farm and industry in approximately forty (40) states. The overall style of the buildings manufactured by the Taxpayer is uniform, but
the dimensions of the buildings and its components are varied and customized to suit the purchaser's needs.
The Taxpayer fabricates and erects in North Carolina prefabricated buildings pursuant to performance contracts. Taxpayer
purchases the raw materials (steel and lumber) used in its business in bulk outside of North Carolina and stores the materials in its own
warehouses at various locations outside of this State. At factories outside of North Carolina, the Taxpayer constructs building
components from the raw materials. These building components include such items as trusses, columns, metal panels, and overhang
rafters. Taxpayer ultimately incorporates the building components into the buildings that it constructs in North Carolina.
STATEMENT OF CASE
On December 13, 1996 and December 27, 1999 the Taxpayer submitted claims for refund for the amount of sales and use tax
that Taxpayer remitted on the purchases of tangible personal property that was used to fabricate building components at the Taxpayer's
out-of-state facilities. Thereafter, the Taxpayer brought the building components into North Carolina to perform building contracts.
On January 31, 2001, the North Carolina Department of Revenue notified the Taxpayer's representative that the claims for refund were
denied. On February 23, 2001, the Taxpayer's representative notified the North Carolina Department of Revenue that the Taxpayer
objected to the denial of the refund claims and requested a hearing before the Secretary of Revenue. After conducting a hearing, the
Assistant Secretary of Revenue entered a Final Decision on May 24, 2002 denying Taxpayer's refund claims of sales and use taxes for
the periods of November 1, 1993 through June 30, 1996 and January 1, 1997 through August 31, 1999. Pursuant to N.C.G.S. § 105-
241.2, Taxpayer's attorney timely filed a notice of intent and petition for administrative review of the Assistant Secretary's Final
Decision with the Tax Review Board.
ISSUE
The issue to be considered by the Board on review of this matter is stated as follows:
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1859
Whether the Taxpayer is liable for use tax on its purchases of tangible personal property incorporated into building
components at the out-of-state locations for those buildings components that are brought into the State and used in the fulfillment of
performance contracts to erect structures.
EVIDENCE
The Tax Review Board reviewed the following evidence presented by the parties at the hearing before the Assistant Secretary
of Revenue:
E-1 Memorandum dated May 16, 2001 from the Secretary of Revenue to the Assistant Secretary of Administrative Hearings.
E-2 Taxpayer's claim for refund for the period January 1, 1993 through June 30, 1996 and statement of facts and grounds for
recovery dated December 13, 1996.
E-3 Taxpayer's claim for refund for the period January 1, 1997 through August 31, 1999 and statement of facts and grounds for
recovery dated December 27, 1999.
E-4 Letter dated December 18, 1996 from the taxpayer's representative to the Department.
E-5 Letter dated January 14, 1997 from the Department to the taxpayer.
E-6 Letter dated April 15, 1997 from the Department to the taxpayer's representative.
E-7 Letter dated April 22, 1997 from the taxpayer's representative to the Department.
E-8 Letter dated August 1, 1997 from the Department to the taxpayer's representative.
E-9 Letter dated September 16, 1997 from the taxpayer's representative to the Department.
E-10 Letter dated October 20, 1997 from the Department to the taxpayer's representative.
E-11 Letter dated November 17, 1997 from the taxpayer's representative to the Department.
E-12 Letter dated December 23, 1997 from the taxpayer's representative to the Department.
E-13 Letter dated December 31, 1997 from the Department to the taxpayer's representative.
E-14 Letter dated March 20, 1998 from the Department to the taxpayer's representative.
E-15 Letter dated December 28, 1999 from the taxpayer's representative to the Department.
E-16 Letter dated February 3, 2000 from the Department to the taxpayer's representative.
E-17 Letter dated January 5, 2001 from the taxpayer's representative to the Department.
E-18 Letter dated January 31, 2001 from the Department to the taxpayer's representative.
E-19 Letter dated February 23, 2001 from the taxpayer's representative to the Department.
E-20 Letter dated March 6, 2001 from the Department to the taxpayer's representative.
E-21 Letter dated June 7, 2001 from the Department to the taxpayer's representative.
E-22 Letter dated June 22, 2001 from the taxpayer's representative to the Department.
E-23 Letter dated July 25, 2001 from the Department to the taxpayer's representative.
E-24 Letter dated September 4, 2001 from the taxpayer's representative to the Department.
E-25 Letter dated September 10, 2001 from the Department to the taxpayer's representative.
E-26 Letter dated September 19, 2001 from the taxpayer's representative to the Department.
E-27 Letter dated October 4, 2001 from the Department to the taxpayer's representative.
E-28 Letter dated December 6, 2001 from the taxpayer's representative to the Department.
E-29 Stipulations of Fact.
E-30 Letter dated December 7, 2001 from the Department to the taxpayer's representative.
E-31 Letter dated December 13, 2001 fro m the Department to the taxpayer's representative.
E-32 Letter dated December 13, 2001 from the Assistant Secretary to the taxpayer's representative.
E-33 New York Supreme Court Appellate Division, In the Matter of Morton Buildings, Inc. v Chu, dated January 8, 1987.
E-34 Missouri Administrative Hearing Commission decision, Morton Buildings, Inc. vs. Director of Revenue, dated December 8,
1989.
E-35 Wisconsin Circuit Court decision, Wisconsin Department of Revenue vs. Morton Buildings, Inc., dated February 10, 1992.
E-36 Connecticut Supreme Court decision, Morton Buildings, Inc. v. Bannon, dated May 12, 1992.
E-37 Minnesota Supreme Court decision, Morton Buildings, Inc. v. Commissioner of Revenue, dated August 7, 1992.
E-38 Texas Court of Appeals decision, Sharp v. Morton Buildings, Inc., dated June 19, 1997.
E-39 Massachusetts Appeals Court decision, Morton Buildings, Inc. v. Commissioner of Revenue, dated August 28, 1997.
E-40 Vermont Supreme Court decision, Morton Buildings Inc. v. Vermont Department of Taxes, dated December 26, 1997.
E-41 Colorado Final Determination, In Re Morton Buildings, Inc., dated January 7, 1999.
TP-1 Brief of Petitioner Morton Buildings, Inc. dated February 6, 2002.
TP-2 State v. Roger Blackstock, 314 NC 232, 333 S.E. 2d 245 (1985).
TP-3 1957 Session Law.
FINDINGS OF FACTS
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1860
1. Morton seeks a refund for sales and use tax for the periods November 1, 1993 through June 30, 1996 and January 1,
1997 through August 31, 1999 (hereinafter collectively referred to as the "Tax Periods").
2. During the Tax Periods at issue, Morton timely filed all Monthly, Quarterly, and Annual Sales and Use Tax Returns
with the Department and tendered timely payments of the taxes shown thereon to be due.
3. On December 18, 1996, pursuant to N.C.G.S.§ 105-266.1, Morton filed an Application for Refund of Use Tax paid
with the Department of Revenue. This application was amended on September 16, 1997 and November 17, 1997.
The refund sought for the period of November 1, 1993 and June 30, 1996 was $94,280.71 plus interest as provided
by law. Morton's request for refund was timely under N.C.G.S.§ 105-266(c) and N.C.G.S.§ 105-266.1.
4. On December 28, 1999, pursuant to N.C.G.S.§ 105-266.1, Morton filed Morton filed an Application for Refund of
Use Tax paid with the Department of Revenue. The refund sought for the period of January 1, 1997 and August 31,
1999 was $171,184.40 plus interest as provided by law. Morton's request for refund was timely under N.C.G.S.§
105-266(c) and N.C.G.S.§ 105-266.1.
5. On February 3, 2000, the Department of Revenue denied Morton's Claim for Refund of January 1, 1997 and August
31, 1999.
6. On January 31, 2001 the Department of Revenue denied Morton's Claim for Refund for the period of January 31,
1993 through June 30, 1996 and January 1, 1997 and August 31, 1999.
7. February 23, 2001, pursuant to N.C.G.S. § 105-266.1, Morton submitted a timely request for an administrative
hearing for its refund claims.
8. The parties agree that Morton is entitled to a hearing before the Secretary or his designee for the refund claims for
the Tax Period pursuant to N.C.G.S. § 105-266.1.
9. Morton's Claims for Refund are for use tax paid on the cost of raw materials purchased and used in its out-of-state
factories to manufacture building components and hardware ("Building Components") that were incorporated by
Morton into buildings assembled in North Carolina. Morton accrued and paid use tax on the cost of the materials
used to manufacture the Building Components.
10. Pass through items ("Pass Through Items") include such items as lumber, cement, nails, staples, insulation,
windows, doors and some hardware that were purchased by Morton in final form from suppliers outside of North
Carolina. Morton's Claims for Refund state that all use taxes paid during the Tax Periods, less the amount of tax
paid for Pass Through Items, should be refunded to Morton on the grounds that the purchases on which those taxes
were paid are not subject to use tax under N.C.G.S. §105-164.6.
11. Morton's second refund claim of $171,184.20 was based on Morton's estimate that approximately 16.64% of the use
taxes paid by Morton during the second refund claim Tax Period related to Pass Through Items. This estimated
amount was deducted from the total use tax paid by Morton in calculating the refund amounts shown on the second
claim for refund. No such deduction was made from the first claim for re fund. More recently, Morton, having
computerized its records, was able to determine a more accurate percentage for use tax paid on Pass Through Items
for the State of North Carolina, such percentage being 34.3%; therefore the correct amount of the second refund
claim at issue in this case is $134,918.60. The parties agree that 34.3% is a reasonable estimate of the percentage of
use taxes paid by Morton during the Tax Periods related to Pass Through Items. Therefore, the correct amount of
the first refund claim is $61,942.43, and the total amount of refund claims in this case if $196,861.03 plus interest.
12. Taxpayers are allowed a credit against the amount of state and local use tax due in North Carolina for any state and
local sales or use tax legally due and paid to another state or local taxing jurisdiction for purchases of tangible
personal property stored, used or consumed in North Carolina. Morton has received all such credits to which it is
entitled. Such credits are not available with respect to the taxes at issue in this case.
13. The contract between Morton and its customers provides that title does not pass until the building is completed on
site by Morton and turned over to the customer. Morton bears the risk of loss for any damage to the Building
Components and other materials prior to that time. A copy of the standard form of contract between Morton and its
customers is attached as Exhibit A of the Stipulations of Fact (E-29).
14. For purposes of the taxes at issue in this case, Morton operates in the capacity of a construction contractor in North
Carolina.
15. Morton's customers own the real estate on which the buildings are erected by Morton.
16. The erection and installation of a Morton building is a permanent improvement to real property in North Carolina
for sales and use tax purposes as the contract between Morton and its customers provides for Morton to deliver,
erect, and affix a completed building in finished condition to the customer's building site at a lump sum price
specified in the contract.
17. The Building Components become a permanent improvement to real estate and when a completed building was
transferred to the customer, sales or use tax was not due on the sales price charged by Morton for the building.
18. Morton is a corporation organized under the laws of the State of Illinois. Its principal place of business is located in
Morton, Illinois. At all pertinent times Morton was qualified to do business in the state of North Carolina.
19. Morton is engaged in the production, sale, and on-site erection of prefabricated timber-frame, metal-sheathed
warehouses, and other buildings for use by farm and industry in approximately 40 states.
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1861
20. Morton has no factories in North Carolina at which it manufactures Building Components but Morton does maintain
sales offices in North Carolina, from which it occasionally makes retail sales of Building Components. Morton
collects and remits North Carolina state and local sales tax upon such sales. Morton makes no claim for refund of
these sales taxes.
21. The overall style of the buildings made by Morton is uniform, but various features such as doors, windows, and
skylights may be specially ordered and the dimensions of the building itself may be varied to suit the purchaser's
needs.
22. Morton purchases the raw materials ("Raw Materials") used in its business in bulk from vendors outside North
Carolina and stores them in its own warehouses in various locations outside of North Carolina. The principal Raw
Material include, among others, steel and lumber. The Raw Materials are not purchased by Morton for application
to any particular customer order, either within or without North Carolina. Determinations of the quantities of Raw
Materials to be purchased for any given period are made by Morton based on projections on a factory-by-factory
basis based on the prior history of quantities used at the respective factories and considerations of the economy.
23. During the Tax Periods Morton had several factories, all of which were located outside North Carolina. Two of the
factories were located in Kenton, Ohio and Gettysburg, Pennsylvania. Morton manufactured Building components
for its North Carolina customers only at Morton's factories in Kenton, Ohio and Gettysburg, Pennsylvania. These
two factories also made Building Components for customers in at least 16 other states. At its factories, Morton's
employees manufactured from Raw Materials the Building Components used in erecting Morton's buildings.
24. When Morton receives an order, the necessary Raw Materials are withdrawn from storage and are consumed and
transformed by Morton in the manufacture of finished Building Components in accordance with the customer's
specifications and in the manner described in paragraphs 25 through 32 hereto. The manufacturing processes
performed by Morton in each of its various out-of-state factories is uniform.
25. The Building Components that are made by Morton include trusses, lower columns, upper columns, purlins, metal
panels, overhand rafters and hardware. The manufacturing processes performed by Morton with respect to each of
those Building Components are briefly discussed below.
26. To manufacture the trusses, the upper chords and lower chords that will form the truss are run through a machine
which cuts the chords to the proper lengths and to the proper angles at both ends of each chord. Lumber webbing,
which is attached between the upper and lower chords, is also cut to the correct length and to the correct angles. The
trusses (chords and webs) are then transferred to a fixture table where they are positioned "face-up" and metal gusset
plates are positioned at each joint. Metal gusset plates are manufactured by Morton from rolled steel. The gusset
plates are then stitched into position with a pneumatic gun nailer. The truss is then repositioned "face-down" and
additional metal gusset plates are positioned onto the joints on that side of the truss. The truss is then positioned
onto a conveyor and transported through a roller press machine. The roller press machine imbeds the metal gusset
plates into the wooden chords and webs at the pre-selected positions. The trusses include end trusses and
intermediate trusses.
27. To manufacture the lower columns, Morton utilizes preservation treated lumber. The lumber is trimmed to length as
required. The lumber is then run through Morton's column machine, a computerized manufacturing process, which
indexes the lumber to various prepositioned locations and clamps it from the top and side. While clamped, nails are
driven into the column lumber at prescribed angles. The laminating process (indexing, clamping, and nailing) is
repeated until the column is completed. The lower columns then proceed to the drilling station and holes are drilled
through the bottom of the lower columns at the prescribed locations.
28. To manufacture the upper columns, Morton cuts the lumber to length and cuts the ends of lumber to the prescribed
angles. The lumber is then run through Morton's column machine, which indexes the lumber to various
prepositioned stops as part of the computerized manufacturing process. The same laminating process (indexing,
clamping, and nailing) is used for the upper columns and the lower columns. The upper columns then are affixed
with 2-inch by 2-inch blocks on the outside of the upper columns. When assembled together, the upper columns and
the lower columns form the main support, sidewall, structural corner, and end columns (collectively, the columns).
29. To manufacture the purlins, Morton feeds the lumber through a machine, a computerized manufacturing process,
which cuts each end of the lumber to the correct length, and squares the end of the lumber. Thereafter, metal
connector plates, also manufactured by Morton, are positioned at each end of the purlin and are pressed into
position. At the same time during the manufacturing process, holes are drilled into the purlins at prepositioned
locations so that the purlins may be readily assembled to the truss at the job site. Morton also manufactures wind
ties, utilizing the same process as that used to manufacture purlins.
30. To manufacture the metal panels, Morton purchases coils of galvanized cold-rolled steel which are shipped to an
independent contractor outside North Carolina for application of coatings to the steel. The rolled steel, with applied
coatings, is then delivered to Morton's factories. When a factory receives an order, it manufactures the required
interior and exterior metal panels by processing the rolled steel through a machine that rolls channels into the steel to
add strength. The steel is then cut to specific length according to the requirements of the particular order. With the
application of different paints and produced in various sizes, the metal panels are used for a variety of purposes
including, inter alia, exterior sheeting, sidewalls and roof panels.
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1862
31. To manufacture the overhang rafters, Morton utilizes a manufacturing process essentially similar to that employed in
manufacturing the trusses. Anywhere between 2 and 6 pieces of lumber are cut to the proper lengths, and are cut to
the proper angles at the ends of each piece of lumber. The overhang rafter is then transferred to a fixture table where
it is positioned "face-up" and metal gusset plates, manufactured by Morton, are positioned at the various joints. The
metal gusset plates are then stitched into positions with a pneumatic gun nailer. The overhang rafters are then
repositioned "face-down" and metal gusset plates are positioned onto a conveyor and transported through a roller
press machine which inbeds the metal gusset plates into the wooden members.
32. Morton also manufactures some of the hardware for the buildings at its plants in Goodfield, Illinois, using a variety
of metal working machines; an example of manufactured hardware is the gusset plates that are used in the
manufacture of trusses. To manufacture gusset plates, galvanized coil steel is run through die machines where the
steel is cut to size, straightened and punched to create diagrams with indentations to fit with the trusses.
33. All of the transportation, loading, unloading, and erection of the buildings is performed by Morton's employees or,
in certain circumstances, by subcontractors hired by Morton. The Building Components and the Pass Through Items
are transported to the building site in North Carolina by Morton's employees in its trucks, typically in one load.
34. The erection-site crew typically consists of three members: a "crew foreman", a "lead man" and a "laborer", all of
whom are Morton employees.
35. Generally, it takes Morton's crew less than one week to complete the erection of a building.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law made by the Assistant Secretary in his decision
regarding this matter:
1. N.C.G.S. § 105-164.6(a) imposes use tax on the storage, use or consumption in this state of tangible personal
property purchased inside or outside the state for storage, use or consumption in the state on the purchase price of
each item or article of tangible personal property that is stored, used or consumed in the state.
2. N.C.G.S. § 105-164.6(b) provides that an excise tax is imposed on the purchase price of tangible personal property
purchased inside or outside the state that becomes a part of a building or other structure in the state. (Typographical
error in the Final Decision is corrected as noted in Taxpayer's Petition at page 6).
3. In N.C.G.S. § 105-164.3(49) the General Assembly has broadly defined the term "use", in pertinent part, as meaning
"… the exercise of any right or power or dominion whatsoever over tangible personal property by a purchaser
thereof….." (Typographical error in the Final Decision is corrected as noted in Taxpayer's Petition at page 6).
4. The purpose of North Carolina's sales and use tax scheme is two-fold. The primary purpose is to generate revenue.
The second purpose is to equalize the tax burden on all state residents. In re Assessment of Additional N.C. &
Orange Court Use Taxes, 312 N.C. 211, 322 S.E.2d 155 (1984).
5. The purpose of the use tax is to remove the discrimination against local merchants resulting from the imposition of a
sales tax, and to equalize the burden of the tax on property sold locally and that purchased outside of the state.
Watson Indus. v. Shaw, 235 N.C. 203, 69 S.E. 2d 505 (1952).
6. When construing a statute imposing a tax, any ambiguities are resolved in favor of the taxpayer.
7. Articles of tangible personal property that are used to fabricate building components brought into the state are used
in the same manner as property not modified or incorporated into components as contemplated under N.C.G.S. §
105-164.6(a).
8. This property becomes part of a build

NORTH CAROLINA
REGISTER
Volume 17, Issue 21
Pages 1829 - 1974
May 1, 2003
This issue contains documents officially filed
through April 9, 2003.
Office of Administrative Hearings
Rules Division
424 North Blount Street (27601)
6714 Mail Service Center
Raleigh, NC 27699-6714
(919) 733-2678
FAX (919) 733-3462
Julian Mann III, Director
Camille Winston, Deputy Director
Molly Masich, Director of APA Services
Ruby Creech, Publications Coordinator
Linda Dupree, Editorial Assistant
Dana Sholes, Editorial Assistant
Rhonda Wright, Editorial Assistant
IN THIS ISSUE
I. EXECUTIVE ORDER
Executive Order No. 49 .............................................1829
II. IN ADDITION
ENR – Notice of Intent to Redevelop a
Brownfields Property – Fiber Mills, LLC ........1830
ENR – Notice of Intent to Redevelop a Brownfields
Property – General Partnership of Samuel J.
Wornom and George R. Perkins, Jr. ..................1831
Revenue – Tax Review Board .....................................1833 - 1864
Voting Rights Letter ....................................................1832
III. RULE-MAKING PROCEEDINGS
Environment and Natural Resources
Health Services, Commission for............................1865
Licensing Boards
Locksmith Licensing Board ......................................1865 - 1866
Transportation
Motor Vehicles, Division of.....................................1865
IV. PROPOSED RULES
Community Colleges
Community Colleges, State Board of......................1877 - 1896
Insurance
Code Officials Qualification Board .........................1867 - 1875
Licensing Boards
Speech and Language Pathologists and
Audiologists, Board of Examiners of ................1875 - 1877
State Personnel
State Personnel Commission....................................1896 - 1900
V. TEMPORARY RULES
Environment and Natural Resources
Wildlife Resources Commission..............................1908 - 1940
Health and Human Services
Secretary, Health and Human Services
Medical Assistance ................................................1901 - 1902
Secretary, Health and Human Services
DMHDDSAS..........................................................1902 - 1908
VI. APPROVED RULES ...................................................1941 - 1961
Agriculture
Food and Drug Protection Division
Community Colleges
Community Colleges Commission
Environment and Natural Resources
Health Services
Health and Human Services
Medical Assistance
Medical Care Commis sion
Secretary of State
Departmental Rules; General Administration Division; Publications
Division; Corporations Division; Securities Division
State Personnel
State Personnel Commission
VII. RULES REVIEW COMMISSION..........................1962
VIII. CONTESTED CASE DECISIONS
Index to ALJ Decisions.................................................1963 - 1969
Text of Selected Decisions
02 CPS 1317 ................................................................1970 - 1974
For the CUMULATIVE INDEX to the NC Register go to:
http://oahnt.oah.state.nc.us/register/CI.pdf
North Carolina Register is published semi-monthly for $195 per year by the Office of Administrative Hearings, 424 North Blount Street, Raleigh, NC
27601. North Carolina Register (ISSN 15200604) to mail at Periodicals Rates is paid at Raleigh, NC. POSTMASTER: Send Address changes to
the North Carolina Register, 6714 Mail Service Center, Raleigh, NC 27699-6714.
NORTH CAROLINA ADMINISTRATIVE CODE CLASSIFICATION SYSTEM
The North Carolina Administrative Code (NCAC) has four major subdivisions of rules. Two of these, titles and
chapters, are mandatory. The major subdivision of the NCAC is the title. Each major department in the North
Carolina executive branch of government has been assigned a title number. Titles are further broken down into
chapters which shall be numerical in order. The other two, subchapters and sections are optional subdivisions to
be used by agencies when appropriate.
TITLE/MAJOR DIVISIONS OF THE NORTH CAROLINA ADMINISTRATIVE CODE
TITLE DEPARTMENT LICENSING BOARDS CHAPTER
1
2
3
4
5
6
7
8
9
10
11
12
13
14A
15A
16
17
18
19A
20
*21
22
23
24
25
26
27
28
Administration
Agriculture
Auditor
Commerce
Correction
Council of State
Cultural Resources
Elections
Governor
Health and Human Services
Insurance
Justice
Labor
Crime Control & Public Safety
Environment and Natural Resources
Public Education
Revenue
Secretary of State
Transportation
Treasurer
Occupational Licensing Boards
Administrative Procedures (Repealed)
Community Colleges
Independent Agencies
State Personnel
Administrative Hearings
NC State Bar
Juvenile Justice and Delinquency
Prevention
Acupuncture
Architecture
Athletic Trainer Examiners
Auctioneers
Barber Examiners
Certified Public Accountant Examiners
Chiropractic Examiners
Employee Assistance Professionals
General Contractors
Cosmetic Art Examiners
Dental Examiners
Dietetics/Nutrition
Electrical Contractors
Electrolysis
Foresters
Geologists
Hearing Aid Dealers and Fitters
Landscape Architects
Landscape Contractors
Locksmith Licensing Board
Massage & Bodywork Therapy
Marital and Family Therapy
Medical Examiners
Midwifery Joint Committee
Mortuary Science
Nursing
Nursing Home Administrators
Occupational Therapists
Opticians
Optometry
Osteopathic Examination & Reg. (Repealed)
Pastoral Counselors, Fee-Based Practicing
Pharmacy
Physical Therapy Examiners
Plumbing, Heating & Fire Sprinkler Contractors
Podiatry Examiners
Professional Counselors
Psychology Board
Professional Engineers & Land Surveyors
Real Estate Appraisal Board
Real Estate Commission
Refrigeration Examiners
Respiratory Care Board
Sanitarian Examiners
Social Work Certification
Soil Scientists
Speech & Language Pathologists & Audiologists
Substance Abuse Professionals
Therapeutic Recreation Certification
Veterinary Medical Board
1
2
3
4
6
8
10
11
12
14
16
17
18
19
20
21
22
26
28
29
30
31
32
33
34
36
37
38
40
42
44
45
46
48
50
52
53
54
56
57
58
60
61
62
63
69
64
68
65
66
Note: Title 21 contains the chapters of the various occupational licensing boards.
NORTH CAROLINA REGISTER
Publication Schedule for January 2003 – December 2003
Filing Deadlines
Notice of
Rule-Making
Proceedings
Notice of Text
Temporary
Rule
volume
& issue
number
issue date last day
for filing
earliest register
issue for
publication of
text
earliest
date for
public
hearing
end of
required
comment
period
deadline to
submit to RRC
for review at
next meeting
first legislative
day of the next
regular session
end of
required
comment
period
deadline to
submit to RRC
for review at
next meeting
first legislative
day of the next
regular session
270th day
from issue
date
17:13 01/02/03 12/06/02 03/03/03 01/17/03 02/03/03 02/20/03 05/00/04 03/03/03 03/20/03 05/00/04 09/29/03
17:14 01/15/03 12/19/02 03/17/03 01/30/03 02/14/03 02/20/03 05/00/04 03/17/03 03/20/03 05/00/04 10/12/03
17:15 02/03/03 01/10/03 04/15/03 02/18/03 03/05/03 03/20/03 05/00/04 04/04/03 04/21/03 05/00/04 10/31/03
17:16 02/17/03 01/27/03 05/01/03 03/04/03 03/19/03 03/20/03 05/00/04 04/21/03 04/21/03 05/00/04 11/14/03
17:17 03/03/03 02/10/03 05/15/03 03/18/03 04/02/03 04/21/03 05/00/04 05/02/03 05/20/03 05/00/04 11/28/03
17:18 03/17/03 02/24/03 06/02/03 04/01/03 04/16/03 04/21/03 05/00/04 05/16/03 05/20/03 05/00/04 12/12/03
17:19 04/01/03 03/11/03 06/02/03 04/16/03 05/01/03 05/20/03 05/00/04 06/02/03 06/20/03 05/00/04 12/27/03
17:20 04/15/03 03/25/03 06/16/03 04/30/03 05/15/03 05/20/03 05/00/04 06/16/03 06/20/03 05/00/04 01/10/04
17:21 05/01/03 04/09/03 07/01/03 05/16/03 06/02/03 06/20/03 05/00/04 06/30/03 07/21/03 05/00/04 01/26/04
17:22 05/15/03 04/24/03 07/15/03 05/30/03 06/16/03 06/20/03 05/00/04 07/14/03 07/21/03 05/00/04 02/09/04
17:23 06/02/03 05/09/03 08/01/03 06/17/03 07/02/03 07/21/03 05/00/04 08/01/03 08/20/03 05/00/04 02/27/04
17:24 06/16/03 05/23/03 08/15/03 07/01/03 07/16/03 07/21/03 05/00/04 08/15/03 08/20/03 05/00/04 03/12/04
18:01 07/01/03 06/10/03 09/02/03 07/16/03 07/31/03 08/20/03 05/00/04 09/02/03 09/22/03 05/00/04 03/27/04
18:02 07/15/03 06/23/03 09/15/03 07/30/03 08/14/03 08/20/03 05/00/04 09/15/03 09/22/03 05/00/04 04/10/04
18:03 08/01/03 07/11/03 10/01/03 08/16/03 09/02/03 09/22/03 05/00/04 09/30/03 10/20/03 05/00/04 04/27/04
18:04 08/15/03 07/25/03 10/15/03 08/30/03 09/15/03 09/22/03 05/00/04 10/14/03 10/20/03 05/00/04 05/11/04
18:05 09/02/03 08/11/03 11/03/03 09/17/03 10/02/03 10/20/03 05/00/04 11/03/03 11/20/03 05/00/04 05/29/04
18:06 09/15/03 08/22/03 11/17/03 09/30/03 10/15/03 10/20/03 05/00/04 11/14/03 11/20/03 05/00/04 06/11/04
18:07 10/01/03 09/10/03 12/01/03 10/16/03 10/31/03 11/20/03 05/00/04 12/01/03 12/22/03 05/00/04 06/27/04
18:08 10/15/03 09/24/03 12/15/03 10/30/03 11/14/03 11/20/03 05/00/04 12/15/03 12/22/03 05/00/04 07/11/04
18:09 11/03/03 10/13/03 01/02/04 11/18/03 12/03/03 12/22/03 05/00/04 01/02/04 01/20/04 05/00/04 07/30/04
18:10 11/17/03 10/24/03 02/02/04 12/02/03 12/17/03 12/22/03 05/00/04 01/16/04 01/20/04 05/00/04 08/13/04
18:11 12/01/03 11/05/03 02/02/04 12/16/03 12/31/03 01/20/04 05/00/04 01/30/04 02/20/04 05/00/04 08/27/04
18:12 12/15/03 11/20/03 02/16/04 12/30/03 01/14/04 01/20/04 05/00/04 02/13/04 02/20/04 05/00/04 09/10/04
non-substantial economic impact substantial economic impact
EXPLANATION OF THE PUBLICATION SCHEDULE
This Publication Schedule is prepared by the Office of Administrative Hearings as a public service and the computation of time periods are not to be deemed binding or controlling. Time is
computed according to 26 NCAC 2C .0302 and the Rules of Civil Procedure, Rule 6.
GENERAL
The North Carolina Register shall be
published twice a month and contains the
following information submitted for
publication by a state agency:
(1) temporary rules;
(2) notices of rule-making proceedings;
(3) text of proposed rules;
(4) text of permanent rules approved by
the Rules Review Commission;
(5) notices of receipt of a petition for
municipal incorporation, as required
by G.S. 120-165;
(6) Executive Orders of the Governor;
(7) final decision letters from the U.S.
Attorney General concerning
changes in laws affecting voting in a
jurisdiction subject of Section 5 of
the Voting Rights Act of 1965, as
required by G.S. 120-30.9H;
(8) orders of the Tax Review Board
issued under G.S. 105-241.2; and
(9) other information the Codifier of
Rules determines to be helpful to the
public.
COMPUTING TIME: In computing time in
the schedule, the day of publication of the
North Carolina Register is not included.
The last day of the period so computed is
included, unless it is a Saturday, Sunday, or
State holiday, in which event the period
runs until the preceding day which is not a
Saturday, Sunday, or State holiday.
FILING DEADLINES
ISSUE DATE: The Register is published on
the first and fifteen of each month if the
first or fifteenth of the month is not a
Saturday, Sunday, or State holiday for
employees mandated by the State
Personnel Commission. If the first or
fifteenth of any month is a Saturday,
Sunday, or a holiday for State employees,
the North Carolina Register issue for that
day will be published on the day of that
month after the first or fifteenth that is not
a Saturday, Sunday, or holiday for State
employees.
LAST DAY FOR FILING: The last day for
filing for any issue is 15 days before the
issue date excluding Saturdays, Sundays,
and holidays for State employees.
NOTICE OF RULE-MAKING PROCEEDINGS
END OF COMMENT PERIOD TO A NOTICE OF
RULE-MAKING PROCEEDINGS: This date is 60
days from the issue date. An agency shall
accept comments on the notice of rule-making
proceeding until the text of the proposed rules
is published, and the text of the proposed rule
shall not be published until at least 60 days
after the notice of rule-making proceedings
was published.
EARLIEST REGISTER ISSUE FOR PUBLICATION
OF TEXT: The date of the next issue following
the end of the comment period.
NOTICE OF TEXT
EARLIEST DATE FOR PUBLIC HEARING:
The hearing date shall be at least 15 days
after the date a notice of the hearing is
published.
END OF REQUIRED COMMENT PERIOD
(1) RULE WITH NON-SUBSTANTIAL
ECONOMIC IMPACT: An agency shall
accept comments on the text of a proposed
rule for at least 30 days after the text is
published or until the date of any public
hearings held on the proposed rule,
whichever is longer.
(2) RULE WITH SUBSTANTIAL
ECONOMIC IMPACT: An agency shall
accept comments on the text of a proposed
rule published in the Register and that has
a substantial economic impact requiring a
fiscal note under G.S. 150B-21.4(b1) for
at least 60 days after publication or until
the date of any public hearing held on the
rule, whichever is longer.
DEADLINE TO SUBMIT TO THE RULES
REVIEW COMMISSION: The Commission
shall review a rule submitted to it on or
before the twentieth of a month by the last
day of the next month.
FIRST LEGISLATIVE DAY OF THE NEXT
REGULAR SESSION OF THE GENERAL
ASSEMBLY: This date is the first
legislative day of the next regular session
of the General Assembly following
approval of the rule by the Rules Review
Commission. See G.S. 150B-21.3,
Effective date of rules.
EXECUTIVE ORDER
17:21 NORTH CAROLINA REGISTER May 1, 2003
1829
EXECUTIVE ORDER NO. 49
PROCLAMATION OF STATE OF
DISASTER FOR THE CITY OF EDEN
WHEREAS, I have determined that a State of Disaster
and State of Emergency, as defined in N.C.G.S. §§ 166A-4 and
14.288.1(10), exists in the State of North Carolina, specifically
in the City of Eden as a result of severe drought conditions.
WHEREAS, on 17 December 2002, the City of Eden
proclaimed a local State of Emergency;
WHEREAS, pursuant to N.C.G.S. § 166A-6, the criteria
of Type I disaster are met including the following: 1) Receipt of
the preliminary damage assessment from the Secretary of Crime
Control and Public Safety; 2) The City of Eden declared a local
state of emergency pursuant to N.C.G.S. § 166A-8 and N.C.G.S.
§§ 14-288.12, 14-288.13 and 14-288.14, and forwarded a written
copy of the declaration to the Governor; 3) The preliminary
damage assessment meets or exceeds the criteria established for
the Small Business Disaster Loan Program pursuant to 13 C.F.R.
Part 123, or meets or exceeds the State infrastructure criteria set
out in N.C.G.S. § 166A-6.01(b)(2)a; and 4) A major disaster
declaration by the President of the United States pursuant to the
Stafford Act has not been declared; and
NOW THEREFORE, pursuant to the authority vested
in me as Governor by the Constitution and the laws of the State
of North Carolina, IT IS ORDERED:
Section 1. Pursuant to N.C.G.S. §§ 166A-6 and
14-288.15, a State of Disaster and State of Emergency is hereby
declared for the City of Eden.
Section 2. State and local government entities
and agencies are hereby ordered to cooperate in the
implementation of the provisions of this proclamation and the
provisions of the North Carolina Emergency Operations Plan.
Section 3. Bryan E. Beatty, Secretary of Crime
Control and Public Safety and/or his designee, is hereby
delegated all power and authority granted to me and required of
me by Chapter 166A and Article 36A of Chapter 14 of the
General Statutes for the purpose of implementing the said
Emergency Operations Plan and to take such further action as is
necessary to promote and secure the safety and protection of the
populace in the above-referenced City.
Section 4. Further, Bryan E. Beatty, Secretary of
Crime Control and Public Safety, as chief coordinating officer
of the State of North Carolina, shall exercise the powers
prescribed in N.C.G.S. § 143B-476.
Section 5. I authorize this proclamation: (a) to
be distributed to the news media and other organizations
calculated to bring its contents to the attention of the general
public; (b) unless the circumstances of the state of disaster
prevent or impede, to be promptly filed with the Secretary of
Crime Control and Public Safety, the Secretary of State, and the
clerks of superior court in the counties to which it applies; and
(c) to be distributed to others as necessary to assure proper
implementation of this proclamation.
Section 6 The Type I disaster declaration shall
expire 30 days after the issuance of the state of disaster and
state of emergency and Type I disaster proclamation for the
City of Eden, issued on April 2, 2003, unless renewed by the
Governor or the General Assembly. Such renewals may be
made in increments of 30 days each, not to exceed a total of
120 days from the date for first issuance. The Joint Legislative
Commission on Governmental Operations shall be notified
prior to the issuance of any renewal of a Type I disaster
declaration.
Done in the Capital City of Raleigh, North Carolina this the 2nd
day of April 2003.
__________________________________
MICHAEL F. EASLEY
GOVERNOR
ATTEST:
___________________________________
ELAINE MARSHALL
SECRETARY OF STATE
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1830
This Section contains public notices that are required to be published in the Register or have been approved by the Codifier of
Rules for publication.
SUMMARY OF NOTICE OF
INTENT TO REDEVELOP A BROWNFIELDS PROPERTY
FIBER MILLS, LLC
Pursuant to N.C.G.S. 130A -310.34, Fiber Mills, LLC has filed with the North Carolina Department of Environment and Natural
Resources ("DENR") a Notice of Intent to Redevelop a Brownfields Property ("Property") in Charlotte, Mecklenburg County, North
Carolina. The Property consists of approximately 9 acres and is located at 1000 Seaboard Avenue, at its intersection with Hamilton
Street. Environmental contamination exists on the Property in soil. Fiber Mills, LLC has committed itself to redevelopment of the
Property for nothing other than a mixed-use project that may include industrial, commercial, retail and residential uses. The Notice of
Intent to Redevelop a Brownfields Property includes: (1) a proposed Brownfields Agreement between DENR and Fiber Mills, LLC,
which in turn includes (a) a legal description of the Property, (b) a map showing the location of the Property, (c) a description of the
contaminants involved and their concentrations in the media of the Property, (d) the above-stated description of the intended future use
of the Property, and (e) proposed investigation and remediation; and (2) a proposed Notice of Brownfields Property prepared in
accordance with G.S. 130A-310.35. The full Notice of Intent to Redevelop a Brownfields Property may be reviewed at 600 East
Trade Street, Neighborhood Development Key Business, Charlotte, NC, 28217 by contacting Carolyn Minnich at that address, at
carolyn.minnich@ncmail.net or at (704) 336-3499; or at 401 Oberlin Rd., Raleigh, NC 27605 by contacting Scott Ross at that address,
at scott.ross@ncmail.net, or at (919) 733-2801, ext. 328. Written public comments may be submitted to DENR within 60 days after
the date this Notice is published in a newspaper of general circulation serving the area in which the brownfields property is located, or
in the North Carolina Register, whichever is later. Written requests for a public meeting may be submitted to DENR within 30 days
after the period for written public comments begins. All such comments and requests should be addressed as follows:
Mr. Bruce Nicholson
Head, Special Re mediation Branch
Superfund Section
Division of Waste Management
NC Department of Environment and Natural Resources
401 Oberlin Road, Suite 150
Raleigh, North Carolina 27605
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1831
SUMMARY OF NOTICE OF
INTENT TO REDEVELOP A BROWNFIELDS PROPERTY
General Partnership of Samuel J. Wornom and George R. Perkins, Jr.
Pursuant to N.C.G.S. 130A-310.34, the General Partnership of Samuel J. Wornom and George R. Perkins, Jr. has filed with the North
Carolina Department of Environment and Natural Resources ("DENR") a Notice of Intent to Redevelop a Brownfields Property
("Property") in Sanford, Lee County, North Carolina. The Property consists of 22.8 acres located at the intersection of US-1 Bypass
and Spring Lane. It is bordered to the northeast by industrial acreage, to the north and northwest by undeveloped property, to the
south by commercial retail businesses, to the east by Wilkinson Cadillac car dealership, to the southeast by a State Employees Credit
Union branch, and to the west by land used for residential purposes. Environmental contamination exists on the Property in soil and
groundwater. The partnership of Samuel J. Wornom and George R. Perkins, Jr. has committed itself to make no use of the Property
other than for commercial and retail purposes. The Notice of Intent to Redevelop a Brownfields Property includes: (1) a proposed
Brownfields Agreement between DENR and the partnership of Samuel J. Wornom and George R. Perkins, Jr., which in turn includes
(a) a legal description of the Property, (b) a map showing the location of the Property, (c) a description of the contaminants involved
and their concentrations in the media of the Property, (d) the above-stated description of the intended future use of the Property, and
(e) proposed investigation and remediation; and (2) a proposed Notice of Brownfields Property prepared in accordance with G.S.
130A-310.35. The full Notice of Intent to Redevelop a Brownfields Property may be reviewed at the Suzanne B. Reeves Library, 107
Hawkins Avenue, Sanford, NC 27330, by contacting Michael Matochik at that address or at 919-774-6045; or at 401 Oberlin Rd.,
Raleigh, NC 27605 by contacting Scott Ross at that address, at scott.ross@ncmail.net, or at (919)733-2801, ext. 328. Written
comments may be submitted to DENR within 60 days after the date this Notice is published in a newspaper of general circulation
serving the area in which the Property is located, or in the North Carolina Register, whichever is later. Written requests for a public
meeting may be submitted to DENR within 30 days after the period for written comments begins. All such comments and requests
should be addressed as follows:
Mr. Bruce Nicholson
Head, Special Remediation Branch
Division of Waste Management
NC Department of Environment and Natural Resources
401 Oberlin Road, Suite 150
Raleigh, North Carolina 27605
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1832
U.S. Department of Justice
Civil Rights Division
JDR:MSR:ALF:par Voting Section – NWB.
DJ 166-012-3 950 Pennsylvania Ave., NW
2003-0462 Washington, D.C. 20530
March 24, 2003
Richard J. Rose, Esq.
Poyner & Spruill
P.O. Box 353
Rocky Mount, NC 27802-0353
Dear Mr. Rose:
This refers to three annexations (Ordinance Nos. 0-2002-31, 0-2002-100, and 0-2002-112) and their designation to wards of
the City of Rocky Mount in Edgecombe and Nash Counties, North Carolina, submitted to the Attorney General pursuant to Section 5
of the Voting Rights Act, 42 U.S.C. 1973c. We received your submission on February 12, 2003.
The Attorney General does not interpose any objection to the specified changes. However, we note that Section 5 expressly
provides that the failure of the Attorney General to object does not bar subsequent litigation to enjoin the enforcement of the changes.
In addition, as authorized by Section 5, we reserve the right to reexamine this submission if additional information that would
otherwise require an objection comes to our attention during the reminder of the sixty-day review period. See the Procedures for the
Administration of Section 5 (28 C.F.R. 51.41 and 51.43).
Sincerely,
Joseph D. Rich
Chief, Voting Section
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1833
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessment of Sales and Use )
Tax for the period of October 1, 1992 through )
September 30, 1998 by Secretary of Revenue )
) ADMINISTRATIVE DECISION
) NUMBER: 389
vs. ) as Amended
)
Capital Area Soccer League, Inc. )
This Matter was heard before the Regular Tax Review Board (hereinafter "Board") in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on April 16, 2002, upon a petition filed by Capital Area Soccer League, Inc.
(hereinafter "Taxpayer") for administrative review of the Final Decision of the Secretary of Revenue entered on July 9, 2001,
sustaining the proposed assessment of sales and use tax for the period of October 1, 1992 through September 30, 1998.
Chairman Richard H. Moore, State Treasurer, presided over the hearing with Jo Anne Sanford, Chair, Utilities Commission
and duly appointed member, Noel L. Allen, attorney at law participating.
Attorney Robert V. Bode represented the Taxpayer at the hearing. Kay Linn Miller Hobart, Assistant Attorney General,
appeared at the hearing on behalf of the Secretary of Revenue.
On October 30, 1998, the Department of Revenue completed a sales and use tax audit of the Taxpayer's records and proposed
to assess additional tax, penalties and interest because Taxpayer failed to remit use tax on taxable purchases from out-of-state vendors.
The Taxpayer objected to the assessment on the basis that it would be eligible for a refund of sales and use tax under N.C. Gen. Stat.
105-164.14(b). Even though the hearing before the Secretary of Revenue was a direct result of the audit assessment, the primary issue
considered by the Assistant Secretary was whether the Taxpayer is eligible for a refund of sales and use tax paid pursuant to N.C. Gen.
Stat. 105-164.14(b).
On July 9, 2001, the Acting Assistant Secretary issued a final decision sustaining the proposed assessment of sales and use
tax for the period of October 1, 1992 through September 30, 1998. In sustaining the use tax assessment against the Taxpayer, the
Assistant Secretary determined that the Taxpayer was not an educational or charitable institution within the meaning of N.C. Gen.
Stat. 105-164.14(b) and was ineligible for a refund of sale and use tax paid pursuant to N.C. Gen. Stat. 105-164.14(b). The Assistant
Secretary held that the Taxpayer is an amateur sports organization, established to promote soccer and to serve the interests of its teams
and players. The Assistant Secretary also held that the Department of Revenue correctly denied Taxpayer's refund claims. Pursuant to
N.C. Gen. Stat. 105-241.2, the Taxpayer timely filed a notice of intent and petition for administrative review of the Assistant
Secretary's Final Decision with the Tax Review Board.
On July 10, 2002, the Tax Review Board entered Administrative Decision Number 389 and determined that there existed
sufficient evidence in the record to show that the Taxpayer conducts charitable and educational activities which benefit the area youth
and children and the Taxpayer provides an educational and charitable serve to the area youth children. Thus, the Tax Review Board
ruled that Taxpayer was an educational institution and/or charitable organization within the meaning of N.C. Gen. Stat. 105-164.14(b)
and ordered that the Secretary of Revenue's decision be reversed.
On August 9, 2002, the North Carolina Department of Revenue ("Department of Revenue"), through counsel, filed a Petition
for Judicial Review of Administrative Decision No. 389 in Wake County Superior Court and also filed a Motion to Amend
Admin istrative Decision No. 389 with the Tax Review Board. The Tax Review Board, at the September 5, 2002 meeting, reviewed
the Department of Revenue's Motion to Amend and discussed the issue of its jurisdiction to consider the motion when the Department
of Revenue had petitioned the Court for judicial review of Administrative Decision Number 389.
The Tax Review Board, having determined that it may exercise jurisdiction to consider the motion, and upon review of the
administrative decision and the motion to amend, grants the Department of Revenue's motion and amends Administrative Decision
Number 389 as follows. The Tax Review Board amends Administrative Decision Number 389 by striking the sentence: "Thus, the
Taxpayer is not liable for use tax on its purchases of tangible personal property and is eligible for a refund of sales and use tax paid
pursuant to N.C. Gen. Stat. 105-164.14(b)" and substituting that sentence with the following sentence: Thus, the Taxpayer is eligible
for a refund of sales and use tax paid pursuant to N.C. Gen. Stat. 105-164.14(b).
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1834
WHEREFORE, THE TAX REVIEW BOARD ORDERS that the Department of Revenue's motion be granted and
Administrative Decision Number 389 be and is hereby amended.
Made and entered into the 31st day of January 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1835
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessment of Unauthorized )
Substance Tax Dated June 5, 2001 by the )
Secretary of Revenue of North Carolina )
) ADMINISTRATIVE DECISION
) NUMBER: 391
vs. )
)
Jeffrey Robert Wellman, )
Taxpayer
This Matter was heard before the Tax Review Board (hereinafter "Board") in the City of Raleigh, North Carolina, in the
office of the State Treasurer, on Wednesday, June 12, 2002, upon Jeffrey Robert Wellman's (hereinafter "Taxpayer") petition for
administrative review of the Final Decision of Eugene J. Cella, Assistant Secretary for Administrative Hearings, of the North Carolina
Department of Revenue entered on November 21, 2001, sustaining the assessment of unauthorized substance tax for the period of June
5, 2001.
Chairman Richard H. Moore, State Treasurer, presided over the hearing with Jo Anne Sanford, Chair, Utilities Commission
and duly appointed member, Noel L. Allen, Attorney at Law participating.
The Taxpayer did not appear at the hearing. David J. Adinolfi, II, Associate Attorney General, represented the North
Carolina Secretary of Revenue at the hearing.
Pursuant to G.S. 105-113.111(a) and G.S. 105-241.1, a Notice of Unauthorized Substance Tax Assessment was issued to the
Taxpayer on June 5, 2001. The notice related to a proposed assessment of tax, penalty and interest in the total amount of $1,4000.00
based upon the possession of 61 dosages of oxycodone. The assessment alleged that on February 25, 2001, the Taxpayer possessed a
total of 61 dosages of oxycodone that did not have the proper tax stamps affixed thereto. After conducting a hearing, the Assistant
Secretary entered his decision sustaining the proposed assessment against the Taxpayer. Thereafter, the Taxpayer, through counsel,
timely filed a notice and petition for administrative review of the Assistant Secretary's Final Decision with the Tax Review Board.
ISSUES
The issues considered by the Board upon administrative review of this matter are stated as follows:
1. Did the Taxpayer have actual and/or constructive possession of oxycodone without the proper stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance tax?
EVIDENCE
The evidence submitted to the Assistant Secretary and included in the record for the Board's review is stated as follows:
1. US-1 Form BD-10, Notice of Unauthorized Substance Tax Assessment, dated June 5, 2001.
2. US-2 Letter from the Taxpayer's attorney, dated July 2, 2001, requesting a hearing.
3. US-3 Letter to the Taxpayer's attorney, dated July 9, 2001, advising him that his client's Administrative Tax Hearing
was scheduled for September 25, 2001.
4. US-4 Letter from the Taxpayer's attorney, dated July 17, 2001, requesting that the hearing be conducted by written
communication.
5. US-5 Form BD-4, Report of Arrest and/or Seizure Involving Nontaxpaid (Unstamped) Controlled Substances, which
names the Taxpayer as the possessor of the controlled substances.
6. US-6 Metropolitan Enforcement Group's investigation report.
7. US-7 Memorandum from E. Norris Tolson, Secretary of Revenue, dated May 16, 2001, delegating to Eugene J.
Cella, Assistant Secretary of Administrative Hearings, the authority to hold any hearing required or allowed under
Chapter 105 of the North Carolina General Statutes.
FINDINGS OF FACT
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1836
The Board reviewed the following findings of fact in the Assistant Secretary's decision in this matter:
1. Assessment of Unauthorized Substance Tax was made against the Taxpayer on June 5, 2001, in the sum of
$1,400.00 tax, $560.00 penalty and $31.11 interest, for a total proposed liability of $1,991.11, based on possession
of 61 dosages of oxycodone.
2. The Taxpayer made a timely objection and application for hearing.
3. An administrative tax hearing is not the appropriate forum to address constitutional issues.
4. G.S. 105-113.06(3) clearly defines a "dealer" as a person who actually or constructively possesses 10 or more
dosage units of any controlled substance that is not sold by weight.
5. On February 25, 2001, the Taxpayer possessed 61 dosages of oxycodone.
6. No tax stamps were purchased for or affixed to the oxycodone as required by law.
CONCLUSIONS OF LAW
The Board reviewed the following conclusions of law made by the Assistant Secretary in his decision regarding this matter:
1. An assessment of tax is presumed to be correct.
2. The burden is upon Taxpayer who objects to an assessment to overcome that presumption.
3. Per G.S. 105-113.109, a dealer who actually or constructively possesses an unauthorized substance in this State,
upon which the tax has not been paid, is required to purchase and affix the appropriate stamp. Tax is due from the
dealer at the time the dealer comes into possession of the unauthorized substance.
4. The Taxpayer had actual possession of a total of 61 dosages of oxycodone on February 25, 2001, and was therefore
a dealer as that term is defined in G.S. 105-113.106(3).
5. The Taxpayer is liable for $1,400.00 tax, $560.00 penalty and interest until date of full payment.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by G.S. 105-241.2(b2). After
the Board conducts a hearing, this statute provides in pertinent part:
(b2). "The Board shall confirm, modify, reverse, reduce or
increase the assessment or decision of the Secretary."
Pursuant to G.S. 105-241.1(a), a proposed tax assessment is presumed to be correct and the burden is on the Taxpayer to
rebut that presumption. Since the Taxpayer failed to provide any evidence to overcome the presumption, the Assistant Secretary
properly determined that the Taxpayer possessed an unauthorized substance on February 25, 2001.
The Board having conducted a hearing in this matter and having considered the petition, the brief, the final decision and the
documents of record, concludes that the Assistant Secretary properly determined that the Taxpayer possessed an unauthorized
substance and was a dealer as that term is defined in G.S. 105-113.106(3). Since the unauthorized substance tax is levied at a rate of
$200.00 per 10 dosage units, this Board determines that the Taxpayer's tax assessment liability, regarding his possession of an
unauthorized substance on February 25, 2001, was $1,200.00, based upon the possession of 61 dosage units, rather than $1,400.00.
Thus, this Board reduces the tax assessment levied against the Taxpayer by $200.00.
WHEREFORE, THE TAX REVIEW BOARD ORDERS that the tax assessment levied against the Taxpayer in this
matter be reduced to $1,200.00 and further orders that the Taxpayer is liable, to the North Carolina Department of Revenue, for the tax
in the amount of $1,200.00, plus penalty and interest as allowed by law.
Made and entered into the 15th day of October 2002.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1837
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Additional )
Income Tax for the Taxable Years 1998, and 1999 )
by the Secretary of Revenue North Carolina )
) ADMINISTRATIVE DECISION
) NUMBER: 392
vs. )
)
James L. and Beverly J. Javurek, )
Taxpayers
THIS MATTER is before the Regular Tax Review Board (hereinafter "Regular Board") upon petition for administrative
review filed by James L. and Beverly J. Javurek (hereinafter "Taxpayer") regarding the Final Decision of Eugene J. Cella, Assistant
Secretary for Administrative Hearings of the Department of Revenue (hereinafter "Assistant Secretary"), sustaining the proposed
assessments of additional individual income taxes for taxable years 1998 and 1999.
Pursuant to G.S. 105-241.1, the North Carolina Department of Revenue mailed the Taxpayers Notices of Individual Income
Tax Assessments dated June 12, 2001, assessing tax, penalties and accrued interest for the taxable years 1998 and 1999. The
Taxpayer objected to the assessments and filed a request for hearing. After conducting a hearing, the Assistant Secretary of Revenue
entered a Final Decision, on December 10, 2001, sustaining the proposed assessments of additional individual income tax liability in
the total amount of $1,936.56. Pursuant to G.S. 105-241.2, the Taxpayers filed a notice of intent and petition for administrative
review of the Assistant Secretary's Final Decision with the Tax Review Board.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, the records and documents transmitted by the North
Carolina Secretary of Revenue pertaining to this matter; and it appearing to the Board that Taxpayers' petition for administrative
review should be dismissed since the grounds and arguments upon which relief is sought have been repeatedly rejected by the Courts
and are deemed lacking in legal merit. Thus, the Board concludes that Taxpayers' petition for administrative review is frivolous and is
filed for the purpose of delay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Taxpayer's petition for administrative review be
and is hereby Dismissed.
Made and entered into the 15th day of October 2002.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1838
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Additional )
Income Tax for the Taxable Years 1998, and 1999 )
by the Secretary of Revenue )
) ADMINISTRATIVE DECISION
) NUMBER: 393
vs. )
)
Richard Bryan Henning and Janice G. Henning, )
Taxpayers
THIS MATTER is before the Regular Tax Review Board (hereinafter "Regular Board") upon petition for administrative
review filed by Richard Bryan Henning and Janice G. Henning (hereinafter "Taxpayers") regarding the Final Decision of Eugene
J. Cella, Assistant Secretary for Administrative Hearings of the North Carolina Department of Revenue, (hereinafter "Assistant
Secretary"), sustaining the proposed assessment of additional individual income tax liability in the total amount of $3,273.63 against
Mr. Henning for tax year 1998 and the proposed assessment of additional individual income tax liability in total amount of $1,964.72
for taxable year 1998 and $644.06 for tax year 1999 against the Taxpayers.
Pursuant to G.S. 105-241.1, the North Carolina Department of Revenue mailed the Taxpayers Notices of Individual Income
Tax Assessments dated August 23, 2000, assessing tax, penalties and accrued interest for the taxable years 1998, and 1999. The
Taxpayers objected to the assessments and filed a request for hearing. After conducting a hearing, the Assistant Secretary of Revenue
entered a final decision sustaining the proposed assessments. Pursuant to G.S. 105-241.2, the Taxpayers filed a notice of intent and
petition for administrative review of the Assistant Secretary's Final Decision with the Tax Review Board.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, the records and documents transmitted by the Secretary
of Revenue pertaining to this matter; and it appearing to the Board that the Taxpayers' petition for administrative review should be
dismissed since the grounds and arguments upon which relief is sought have been repeatedly rejected by the Courts and are deemed
lacking in legal merit. Thus, the Board concludes that Taxpayers' petition for administrative review is frivolous and is filed for the
purpose of delay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Taxpayer's petition for review be and is hereby
Dismissed.
Made and entered into the 15th day of October 2002.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. A llen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1839
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Additional )
Income Tax for the Taxable Years 1994, 1995, 1996, )
1997, and 1998 by the Secretary of Revenue )
) ADMINISTRATIVE DECISION
) NUMBER: 394
vs. )
)
Thomas Tilley, )
Taxpayer
THIS MATTER is before the Regular Tax Review Board (hereinafter "Regular Board") upon petition for administrative
review filed by Thomas E. Tilley (hereinafter "Taxpayer") regarding the Final Decision of Eugene J. Cella, Assistant Secretary for
Administrative Hearings of the North Carolina Department of Revenue (hereinafter "Assistant Secretary"), entered on July 9, 2001,
sustaining the proposed assessment of additional individual income tax for taxable years 1994, 1995, 1996, 1997, and 1998.
Pursuant to G.S. 105-241.1, the North Carolina Department of Revenue mailed the Taxpayer Notices of Individual Income
Tax Assessments dated May 21, 2000, assessing tax, penalties and accrued interest for the taxable years 1994, 1995, 1996, 1997, and
1998 in the total amount of $99,355.99. The Taxpayer objected to the assessments and filed a request for hearing. After conducting a
hearing, the Assistant Secretary of Revenue entered a Final Decision sustaining the proposed assessments for individual income tax
liability against the Taxpayer. Pursuant to G.S. 105-241.2, the Taxpayer filed a notice of intent and petition for administrative review
of the Assistant Secretary's Final Decision with the Tax Review Board.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, the records and documents transmitted by the North
Carolina Secretary of Revenue pertaining to this matter; and it appearing to the Board that the Taxpayer's petition should be dismissed
since the grounds and arguments upon which relief is sought have been repeatedly rejected by the Courts and are deemed lacking in
legal merit. Thus, the Board concludes that the Taxpayer's petition for administrative review is frivolous and is filed for the purpose
of delay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that the Taxpayer's petition for administrative review be
and is hereby Dismissed.
Made and entered into the 15th day of October 2002.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1840
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Additional )
Income Tax for the Taxable Years 1993, 1994, 1995, )
1996, 1997, 1998 and 1999 by the Secretary of )
Revenue of North Carolina ) ADMINISTRATIVE DECISION
) NUMBER: 395
vs. )
)
John C. Ainsworth, )
Taxpayer
THIS MATTER is before the Regular Tax Review Board (hereinafter "Regular Board") upon petition for administrative review filed
by John C. Ainsworth (hereinafter "Taxpayer") regarding the Final Decision of Eugene J. Cella, Assistant Secretary for
Administrative Hearings of the North Carolina Department of Revenue (hereinafter "Assistant Secretary"), sustaining the proposed
assessment of additional individual income tax liability for taxable years 1993, 1994, 1995, 1996, 1997, 1998, and 1999.
Pursuant to G.S. 105-241.1, the North Carolina Department of Revenue mailed the Taxpayer Notices of Individual Income
Tax Assessments dated March 11, 2000, February 12, 2001, and March 14, 2001, assessing tax, penalties and accrued interest for the
taxable years 1993, 1994, 1995, 1996, 1997, 1998, and 1999. The Taxpayer objected to the assessments and filed a request for
hearing. After conducting a hearing, the Assistant Secretary of Revenue entered a Final Decision, on February 7, 2002, sustaining the
proposed assessments against the Taxpayer for individual income tax liability in the total amount of $30,927.90. Pursuant to G.S.
105-241.2, the Taxpayer filed a notice of intent and petition for administrative review of the Assistant Secretary's Final Decision with
the Tax Review Board.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, the records and documents transmitted by the North
Carolina Secretary of Revenue pertaining to this matter; and it appearing to the Board that the Taxpayer's petition should be dismissed
since the grounds and arguments upon which relief is sought have been repeatedly rejected by the Courts and are deemed lacking in
legal merit. Thus, the Board concludes that Taxpayer's petition for administrative review is frivolous and is filed for the purpose of
delay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Taxpayer's petition for administrative review be
and is hereby Dismissed.
Made and entered into the 15th day of October 2002.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1841
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Sales and Use Tax )
For the periods November through December 1995, )
April 1996 through March 1997, June through July )
1997, September 1997 through January 1998, March ) ADMINISTRATIVE DECISION
through April 1998, and July through August 1998, ) NUMBER: 396
by the Secretary of Revenue )
vs. )
)
Richard M. Pearman, Jr., )
President of Dependable Housing, Inc. )
This matter was heard before the Regular Tax Review Board (hereinafter "Board") in the City of Raleigh, Wake County, North Carolina, in
the office of the State Treasurer on Thursday, September 5, 2002, upon a petition filed by Richard M. Pearman, Jr., President of Dependable
Housing, Inc., ("Taxpayer") for administrative review of the Final Decision of the Secretary of Revenue entered on December 19, 2000, sustaining
the proposed assessment of sales and use tax for the periods of November through December 1995, April 1996 through March 1997, June through
July 1997, September 1997 through January 1998, March through April 1998, and July through August 1998.
Chairman Richard H. Moore, State Treasurer, presided over the hearing with Jo Anne Sanford, Chair, Utilities Commission and duly
appointed member, Noel L. Allen, attorney at law participating.
Counsel for the Taxpayer did not appear at the hearing. George W. Boylan, Special Deputy Attorney General, appeared at the hearing on behalf of
the Secretary of Revenue.
The Taxpayer appeals from an adverse Final Decision of the Secretary of Revenue entered on December 19, 2000 sustaining a proposed
assessment of sales and use tax for the periods at issue. The Taxpayer was the president of Dependable Housing, Inc., trading as Westwood Homes,
a North Carolina corporation engaged in the business of selling manufactured housing at retail. The corporation filed sales and use tax returns for the
periods in question, reporting tax due, but sent in the reports without remittance of tax. The corporation was assessed tax, penalty and interest for the
periods in question. The corporation did not protest the assessments. The corporation ceased doing business in January 1999.
On October 15, 1999, the Department of Revenue mailed Notices of Sales and Use Tax Assessment to the Taxpayer as President of
Dependable Housing, Inc. The Taxpayer objected to the assessments and requested a hearing that was conducted on August 23, 2000. On December
19, 2000, the Assistant Secretary entered a final decision, which sustained the proposed assessment of sales tax, and penalties that was issued against
the Taxpayer. Thereafter, Taxpayer filed a petition for administrative review of the Assistant Secretary's adverse decision with the Tax Review
Board. In the petition, Taxpayer contends that the Department failed to produce sufficient evidence to show that he is a "responsible corporate
officer" within the meaning of either G.S. 105-253(b)(1) or (2).
In the final decision, the Assistant Secretary made findings of fact that the Taxpayer, as president of the corporation, is a responsible officer
of the corporation under G.S. 105-253. If the Taxpayer failed to make reasonable and prudent inquiry into the proper procedures for remitting sales
tax, then he is personally liable under G.S. 105-253 for the sales taxes collected but not paid to the State.
ISSUE
The issue considered by the Board upon administrative review of this matter is stated as follows:
Is the Taxpayer the responsible corporate officer of the corporation and personally liable under N.C.G.S. 105-253 for sales or
use tax for the periods November through December 1995, April 1996 through March 1997, June through July 1997, September 1997
through January 1998, March through April 1998, and July through August 1998?
EVIDENCE
The evidence submitted to the Assistant Secretary and included in the record for the Board's review is stated listed as follows:
1. Memorandum dated August 20, 1999 from the Secretary of Revenue to the Assistant Secretary of Revenue,
designated Exhibit E-1.
2. The corporation's November 1995 sales and use tax return, designated as Exhibit E-2.
3. Notice of Sales and Use Tax Assessment against the corporation dated May 25, 1998 for November 1995,
designated Exhibit E-3.
4. Letter dated June 10, 1998 from the Taxpayer's attorney to a Revenue Officer, designated Exhibit E-4.
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1842
5. Letter dated July 22, 1999 from the Taxpayer's attorney to a Revenue Officer and the following attachments:
6. Copy of complaint against Penny Jenkins.
7. Copy of Form RO-1063, Collection Information Statement for Businesses.
8. Copy of 1997 U.S. Corporation Income Tax Return, designated Exhibit E-5, E-5a, E-5b, and E-5c, respectively.
9. Notice of Sales Tax Penalty Assessment against the corporation dated July 27, 1998 for November 1995, designated
Exhibit E-6.
10. Letter dated August 16, 1999 from the Sales and Use Tax Division (Division) to the Taxpayer's attorney, designated
Exhibit E-7.
11. Final Notice of Tax Assessment Sales and Use Tax against the corporation dated September 27, 1998 for November
1995, designated Exhibit E-8.
12. Notice of Sales and Use Tax Assessment against Taxpayer as President of the Corporation dated October 15, 1999
for November 1995, designated Exhibit E-9.
13. Letter dated November 8, 1999 from the Taxpayer's attorney to the Division, designated Exhibit E-10.
14. Letter dated November 17, 1999 from the Division to the Taxpayer's attorney, designated Exhibit E-11.
15. Letter dated December 15, 1999 from the Taxpayer's attorney to the Division, designated Exhibit E-12.
16. Letter dated December 20, 1999 from the Division to the Taxpayer's attorney, designated Exhibit E-13.
17. Letter dated January 13, 2000 from the Taxpayer's attorney to the Division, designated Exhibit E-14.
18. Annual Report for Business Corporations received on December 11, 1998 by the Secretary of State, designated
Exhibit E-15.
19. Annual Report dated December 20, 1996 filed with the Secretary of State, designated Exhibit E-16.
20. Notice of Tax Assessment dated March 11, 2000 for November 1995, designated Exhibit E-17.
21. Letter dated March 3, 2000 from the Assistant Secretary of Revenue to the Taxpayer's attorney, designated Exhibit
E-18.
22. Letter dated March 14, 2000 from the Taxpayer's attorney to the Assistant Secretary of Revenue, designated Exhibit
E-19.
23. Letter dated March 15, 2000 from the Assistant Secretary of Revenue to the Taxpayer's attorney, designated Exhibit
E-20.
24. Letter dated June 14, 2000 from the Assistant Secretary of Revenue to the Taxpayer's attorney, designated Exhibit
E-21.
25. Memorandum dated September 15, 2000 from the Division to the Assistant Secretary of Revenue, designated
Exhibit E-22.
26. Application of Extension of Time to file the Corporate Franchise and Income Tax Return, for 1998 for Dependable
Housing, Incorporated, designated Exhibit E-23.
27. 1996 Corporation Franchise and Income Tax Return for Dependable Housing, Incorporated, designated Exhibit E-
24.
28. 1997 Corporate Franchise and Income Tax Return for Dependable Housing, I Incorporated, designated Exhibit E-
25.
29. Sales and Use Tax returns filed by Dependable Housing, Incorporated for periods November 1995 through August
1998, designated Exhibit E-26.
30. Notices of Sales and Use Tax Assessments against Dependable Housing, Incorporated for the periods November
through December 1995, April 1996 through March 1997, June through July 1997, September 1997 through January
1998, March through April 1998, and July through August 1998, designated Exhibit E-27.
31. Notices of Sales and Use Tax Penalty Assessments against Dependable Housing, Incorporated, for the periods
November through December 1995, April 1996 through March 1997, October 1997 through January 1998 and
March 1998, designated Exhibit E-28.
32. Final Notices of Tax Assessment Sales and Use against Dependable Housing, Incorporated, for the periods of
November through December 1995, April 1996 through March 1997, June through July 1997, September 1997
through January 1998, March through April 1998, and July through August 1998, designated Exhibit E-29.
33. Notices of Sales and Use Tax Assessment against Richard M. Pearman, Jr., President of Dependable Housing,
Incorporated, for the periods of November through December 1995, April 1996 through March 1997, June through
July 1997, September 1997 through January 1998, March through April 1998, and July through August 1998,
designated Exhibit E-30.
34. Final Notices of Tax Assessment Sales and Use against Richard M. Pearman, Jr., President of Dependable Housing,
Incorporated, for the periods of December 1995, April 1996 through March 1997, June through July 1997,
September 1997 through January 1998, March through April 1998, and July through August 1998, designated
Exhibit E-31.
35. Letter dated September 12, 2000 from the Assistant Secretary of Revenue to the Taxpayer's attorney, designated
Exhibit S-1.
36. Letter dated October 20, 2000, from the Taxpayer's attorney to the Assistant Secretary of Revenue, designated
Exhibit T-1.
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1843
FINDINGS OF FACT
The Board reviewed the following findings of fact in the Assistant Secretary's decision regarding this matter:
(1) The Taxpayer was the president of Dependable Housing, Incorporated, trading as Westwood Homes, a North
Carolina corporation engaged in the business of selling manufactured housing at retail.
(2) The corporation filed sales and use tax returns for the periods in question, reporting tax due, but sent in the reports
without remittance of tax.
(3) The corporation was assessed tax, penalty and interest for the relevant periods.
(4) The corporation did not protest the assessments for the relevant periods and the assessments against the corporation
became final and conclusive on September 27, 1998.
(5) The Taxpayer signed the North Carolina Corporate Franchise and Income Tax Returns for the tax years1996 and
1997 as corporate president.
(6) The corporation's North Carolina Corporate Franchise and Income Tax Returns for 1996 and 1997 both indicated
sales tax due at both year-ends in the amount $19,434 and $18,914, respectively.
(7) The sales and use tax returns were signed by Cindy Murray, as bookkeeper, for periods in 1995, 1996 and 1997.
Ms. Murray is the Taxpayer's assistant at his law firm.
(8) Beginning in January 1998, the sales tax returns were signed by C. L. Clodfelter, as bookkeeper, through the balance
of the assessed periods.
(9) The corporation ceased conducting business in January 1999.
(10) The corporation was a small, closely held, family-owned company with no more than two shareholders at any one
time. Taxpayer originally incorporated the company and remained its principal executive officer until it ceased
conducting business, including the assessed periods. Since there was no senior financial corporate officer, Taxpayer
as chief executive officer was legally responsible for filing tax returns and paying all company debts.
(11) In October 1999, assessments were imposed against the Taxpayer personally pursuant to N.C.G.S. 105-253 as the
responsible officer for the corporation.
(12) Notices of Proposed Assessment were mailed to the Taxpayer on October 15, 1999.
CONCLUSIONS OF LAW
The Board reviewed the following conclusions of law made by the Assistant Secretary in his decision regarding this matter:
(1) The liability of a responsible officer is satisfied upon the timely remittance of the tax by the corporation or the
limited liability company.
(2) If the tax remains unpaid after it is due and payable, the Secretary of Revenue may assess the tax against and collect
the tax from any responsible officer in accordance with the procedures for assessing and collecting tax from a
taxpayer.
(3) As used in N.C.G.S. 105-253, the term responsible officer means the president and treasurer of a corporation.
(4) Since the rules of evidence do not apply to an administrative tax hearing conducted under N.C.G.S. 105-241.1(c),
Taxpayer's letter of July 22, 1999, is properly in the record. The letter, from the Taxpayer's attorney to the
Department, seeks a compromise of the November 1995 assessment.
(5) On the line designated "Total Amount Due State and County" on the return for each of the assessed periods, the
amount of tax due was entered. This indicates that the person preparing the return had determined that there was
sales tax due to the State of North Carolina.
(6) In order for the sales tax liabilities to have been reported on both the monthly sales tax returns and the corresponding
corporate franchise and income tax returns, the tax must have been collected, as that is the only way the liability
could have been incurred and properly reported in the corporation's accounting records.
(7) Taxpayer has produced no documentation suggesting that sales tax was not collected as reported on the sales tax
returns and as noted on the corporate income and franchise returns.
(8) Pursuant to N.C.G.S. 105-241.1 (a), the assessments have been properly based upon financial information prepared
by and obtained from the corporation, and constitute the best information available.
(9) N.C.G.S. 105-164.4, which levies tax on the sale of manufactured homes, imposes the tax on the retailer, not the
lender or other third parties.
(10) Failure to make reasonable and prudent inquiry into the proper procedures for remittance of sales tax or to determine
if the tax were paid by another person fails the test of "reasonable care" required in N.C.G.S. 105-253.
(11) The Taxpayer constituted a responsible officer for sales tax liability incurred by this corporation because he should
have known in the exercise of reasonable care that sales tax was being collected by the corporation on retail sales of
manufactured homes and not being remitted to the State.
(12) The Taxpayer, as president of the corporation, is a responsible officer of the corporation under N.C.G.S. 105-253.
The record shows that sales tax was collected by the corporation on the retail sales of manufactured homes and the
Taxpayer has produced no evidence to show otherwise.
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1844
(13) The Taxpayer is personally liable under N.C.G.S. 105-253(b)(1) for the sales taxes collected by the corporation and
not remitted to the State.
(14) The Taxpayer is personally liable for the sales taxes pursuant to N.C.G.S. 105-253(b)(2), as he did not exercise
reasonable care with regard to their collection and remittance.
(15) Notices of Assessment for the periods of November 1995, December 1995, April 1996 through March 1997, June
1997 through July 1997, September 1997 through January 1998, March through April 1998, and July through
August 1998, were properly issued pursuant to N.C.G.S. 105-241.1.
(16) The Taxpayer timely protested his Notices of Proposed Assessment dated October 15, 1999.
DECISION
The Taxpayer was the president of Dependable Housing, Inc., trading as Westwood Homes, a North Carolina corporation
engaged in the business of selling manufactured housing at retail. The corporation filed sales and use tax returns for the periods in
question, reporting sales tax due, but sent the returns without remittance of the tax. Although sales tax assessment notices were sent to
the corporation, it did not protest any of the assessments so the Department of Revenue billed the assessments as final. The
corporation ceased conducting business in January 1999. In October 1999, an assessment was made against the Taxpayer personally
pursuant to N.C.G.S. 105-253 as the responsible corporate officer for the corporation. As stated in the Assistant's Secretary's final
decision the Department argued that the Taxpayer, as the president of the corporation, is responsible for the sales taxes collected but
not paid to the State under both subparagraphs 1 and 2 of N.C.G.S. 105-253 (b).
N.C.G.S. 105-253 reads in pertinent part that:
"(b) Each responsible officer is personally and individually liable for all of the following:
(1) All sales and use taxes collected by a corporation or limited liability company upon its taxable transactions.
(2) All sales and use taxes due upon taxable transactions of a corporation or limited liability company but upon
which it failed to collect the tax, but only if the person knew, or in the exercise of reasonable care should
have known, that tax was not being collected."
The scope of administrative review for petitions filed with the Tax Review Board is governed by G.S. 105-241.2(b2). After
the Board conducts a hearing this statute provides in pertinent part:
(b2). "The Board shall confirm, modify, reverse, reduce or
increase the assessment or decision of the Secretary."
The Board having conducted an administrative hearing, and having considered the Petition, the brief, the arguments and the
record in this matter, concludes that the findings of fact contained in the Assistant Secretary's decision were fully supported by
competent evidence in the record; that the conclusions of law made by the Assistant Secretary were fully supported by the findings of
fact; and the Assistant Secretary's final decision sustaining the proposed assessment of additional sales and use tax was fully supported
by the conclusions of law.
WHEREFORE, THE TAX REVIEW BOARD ORDERS that the Assistant Secretary's final decision sustaining the
proposed assessment of sales and use tax for the periods of November through December 1995, April 1996 through March 1997, June
through July 1997, September 1997 through January 1998, March through April 1998, and July through August 1998 be and is hereby
Confirmed.
Made and entered into the 19th day of December 2002.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1845
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Unauthorized )
Substance Tax dated March 16, 2001 by )
The Secretary of Revenue of North Carolina )
) ADMINISTRATIVE DECISION
) NUMBER: 397
)
vs. )
)
Farelia Glover Fleming, )
Taxpayer )
This Matter was heard before the Tax Review Board (hereinafter "Board") in the City of Raleigh, North Carolina, in the
office of the State Treasurer, on Thursday, September 5, 2002, upon Farelia Glover Fleming's (hereinafter "Taxpayer") petition for
administrative review of the Final Decision of Eugene J. Cella, Assistant Secretary for Administrative Hearings, entered on December
5, 2001, sustaining the assessment of unauthorized substance tax in the amount of $29,000.00, plus interest as required by law.
Chairman Richard H. Moore, State Treasurer, presided over the hearing with Jo Anne Sanford, Chair, Utilities Commission
and duly appointed member, Noel L. Allen, Attorney at Law participating.
Mr. and Mrs. Fleming appeared at the hearing. David J. Adinolfi, II, Associate Attorney General, represented the North
Carolina Secretary of Revenue at the hearing.
STATEMENT OF FACTS AND CASE
Between April 19, 2000 and January 12, 2001, the Taxpayer obtained 50 hydrocodone prescriptions from numerous doctors
and a registered nurse and had them filled a various pharmacies. Investigators interviewed ten of the doctors involved in this matter
and stated that the Taxpayer failed to inform them that she was also being prescribed the Schedule III narcotic hydrocodone by other
physicians. Based upon the investigation, 36 of the prescriptions, totaling 1,416 dosages were deemed fraudulent and therefore
subject to the unauthorized substance tax. On March 16, 2001, the Department of Revenue issued an unauthorized substance tax
assessment against the Taxpayer.
Taxpayer appeals from an adverse decision of the Assistant Secretary of Revenue entered on December 5, 2001 sustaining a
proposed assessment of an unauthorized substance tax in the amount of $29,000.00 together with interest as allowed by law. The
Assistant Secretary, under the provisions of G.S. 105-260.1, scheduled a hearing in this matter. The Taxpayer and her husband, who
is an attorney, appeared at the hearing before the Assistant Secretary. Also appearing at the hearing was Taxpayer's physician, Dr.
Rudolph J. Maier.
At the hearing before the Assistant Secretary, the Taxpayer's primary argument is that she obtained the pills to combat the
extreme chronic pain she suffers from due to migraines and fybromyalgia. Mr. Fleming argued that his wife is essentially
unemployable due to her illness, and as no assets, and that the Department of Revenue should accept her offer in compromise. After
the hearing, the Assistant Secretary issued a final decision that affirmed the assessment in the amount of $29,000.00 and waived the
$11,600 penalty imposed against the Taxpayer.
In the Petition filed with the Board, the Taxpayer argues that the intent of the Unauthorized Substance Tax is to combat drug
trafficking by levying a punitive tax burden upon drug dealers. Since she is not a drug dealer, the Taxpayer contends that the
assessment should be dismissed. The Taxpayer further argues that she has a limited earning capacity due to her various health
problems and has requested the Department of Revenue to accept her $2,100 offer in compromise or cancel the assessment.
ISSUES:
1. Did the Taxpayer have actual/or constructive possession of hydrocodone without proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1846
FINDINGS OF FACT
After considering the petition, brief, record and considering the arguments presented by the parties, the Board makes the
following finding of fact:
1. An Assessment of Unauthorized Substance Tax was made against the Taxpayer on March 16, 2001, in the sum of
$29,000.00 tax, $11,600.00 penalty and $1,333.62 interest, for a total proposed liability of $41,933.62, based upon
the unlawful possession of 1,416 dosages of hydrocodone for the period at issue.
2. The Taxpayer made a timely objection and application for hearing.
3. The Taxpayer suffers from medical conditions that cause her to have chronic pain.
4. The Assistant Secretary, after conducting the hearing, sustained the proposed tax assessment together with interest
as allowed by law, but waived the penalty.
5. The Taxpayer filed a timely notice of intent and petition for administrative review with the Board.
CONCLUSIONS OF LAW
The Board reviewed the following conclusions of law made by the Assistant Secretary in his decision regarding this matter:
1. An assessment of tax is presumed to be correct.
2. The burden is upon the Taxpayer who objects to an assessment to overcome that presumption.
3. Pursuant to G.S. 105-113.109, a dealer who actually or constructively possesses an unauthorized substance in this
State, upon which the tax has not been paid, is required to purchase and affix the appropriate stamp. Tax is due from
the dealer at the time the dealer comes into possession of the unauthorized substance.
4. The Taxpayer, as a matter of law, is not a dealer as that term is defined in G.S. 105-113.109 and is therefore not
liable for the proposed assessment issued against her on March 16, 2001, in the amount of $29,000 tax, together with
interest.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by G.S. 105-241.2(b2). After the Board
conducts a hearing, this statute provides in pertinent part:
(b2). "The Board shall confirm, modify, reverse, reduce or
increase the assessment or decision of the Secretary."
The Board having conducted an administrative hearing in this matter, and having considered the petition, the brief, the record
and final decision, concludes that the findings of fact contained in the Assistant Secretary's final decision are not supported by
competent evidence in the record; that based upon the findings of fact, the Assistant Secretary's conclusions of law were not fully
supported by the findings of fact; therefore the Assistant Secretary's final decision should be reversed.
WHEREFORE, THE TAX REVIEW BOARD ORDERS that the Assistant Secretary final decision
sustaining the proposed tax assessment together with interest against the Taxpayer be and is hereby
REVERSED.
Made and entered into the 19th day of December 2002.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1847
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Unauthorized )
Substance Tax dated July24, 2001 by )
The Secretary of Revenue of North Carolina )
) ADMINISTRATIVE DECISION
) NUMBER: 398
)
vs. )
)
James M. Barbee, )
Taxpayer )
This Matter was heard before the Tax Review Board (hereinafter "Board") in the City of Raleigh, North Carolina, in the
office of the State Treasurer, on Thursday, September 5, 2002, upon James M. Barbee's (hereinafter "Taxpayer") petition for
administrative review of the Final Decision of Eugene J. Cella, Assistant Secretary for Administrative Hearings entered on April 24,
2002, sustaining the assessment of unauthorized substance tax for the period of July 24, 2001.
Chairman Richard H. Moore, State Treasurer, presided over the hearing with Jo Anne Sanford, Chair, Utilities Commission
and duly appointed member, Noel L. Allen, Attorney at Law participating.
The Taxpayer and his attorney, George Hughes appeared at the hearing. David J. Adinolfi, II, Associate Attorney General,
appeared at the hearing for the North Carolina Secretary of Revenue at the hearing.
Pursuant to G.S. 105-113.111(a) and G.S. 105-241.1, a Notice of Unauthorized Substance Tax Assessment was issued to the
Taxpayer on July 24, 2001. The notice related to a proposed assessment of tax, penalty and interest in the total amount of $38,052.00
based upon the possession of 27,180 grams of marijuana. The assessment alleged that on February 25, 2001, the Taxpayer possessed
a total of 27,180 grams of marijuana. After conducting a hearing, the Assistant Secretary entered his decision sustaining the proposed
assessment against the Taxpayer. Thereafter, the Taxpayer, through counsel, timely filed a notice and petition for administrative
review of the Assistant Secretary's Final Decision with the Tax Review Board.
ISSUES
The issues considered by the Board upon administrative review of this matter are stated as follows:
1. Did the Taxpayer have actual and/or constructive possession of marijuana without the proper stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance tax?
EVIDENCE
The evidence submitted to the Assistant Secretary and included in the record for the Board's review is stated as follows:
1. US-1, Form BD-10, "Notice of Unauthorized Substance Tax Assessment," dated July 24, 2001.
2. US-2, Letter from the Taxpayer's attorney, dated August 17, 2001, objecting to the assessment and requesting a
hearing.
3. US-3, Letter to the Taxpayer's attorney, dated August 29, 2001, advising him that his client's Administrative Tax
Hearing was scheduled for November 20, 2001.
4. US-4, Forms BD-4, "Report of Arrest and/or Seizure Involving Nontaxpaid (Unstamped) Controlled Substances,"
naming the Taxpayer as the possessor of the controlled substance.
5. US-5, The Montgomery County Sheriff's Office incident report, including the voluntary statement of the Taxpayer.
6. US-6, Memorandum from E. Norris Tolson, Secretary of Revenue, dated May 16, 2001, delegating to Eugene J.
Cella, Assistant Secretary of Administrative Hearings, the authority to hold any hearing required or allowed under
Chapter 105 of the North Carolina General Statutes.
FINDINGS OF FACT
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1848
The Board, after conducting a hearing in this matter and after reviewing the petition, the final decision and the record from
the proceeding before the Assistant Secretary, makes the following findings of fact:
1. The Board has jurisdiction over the parties and subject matter of this appeal.
2. The Taxpayer filed a timely notice of intent and petition for administrative review of the Assistant Secretary's final
decision that was entered on April 24, 2002.
3. The record does not contain sufficient evidence to show that the Taxpayer possessed 29,221 grams of marijuana as
set for in the proposed assessment of on July 24, 2001 and there is no evidence to show that the Taxpayer purchased
and possessed five pounds of marijuana every two weeks during the six months prior to July 13, 2001.
4. For the period at issue, the Taxpayer possessed 1958.3 grams of marijuana.
5. The proposed assessment of unauthorized substance tax, issued on July 24, 2001, in the sum of $102,273.50 tax,
$40,909.40 penalty and $681.82 interest, for a total proposed liability of $143,864.72, is not valid.
6. No tax stamps were purchased for or affixed to the 1,958.3 grams of marijuana as required by law.
CONCLUSIONS OF LAW
Based upon the foregoing findings of fact, the Board makes the following conclusions of law:
1. Even though the assessment of tax in this matter is presumed to be correct, the Taxpayer may overcome the
presumption by producing any evidence showing that he did not possess 29,221 grams of marijuana at the time of
his arrest. Based upon the evidence, the Taxpayer has overcome the presumption by producing evidence to show
that he only possessed 1,958.3 grams of marijuana for the period at issue.
2. G.S. 105-113.106(3) defines a dealer as "a person who actually or constructively possesses more than 42.5 grams of
marijuana, seven or more grams of any other controlled substance that is sold by weight, or 10 or more dosage units
of any other controlled substance that is not sold by weight."
3. Pursuant to G.S. 105-113.109, a tax is imposed against a dealer who possesses an authorized substance in this State
upon which the tax has not been paid, as evidence of a stamp.
4. The Taxpayer is a dealer since he possessed 1,958.3 grams of marijuana for the period at issue upon which the tax
had not been paid.
5. The Taxpayer is liable for the tax, penalty and interest until fully paid for the possession of 1,958.3 grams of
marijuana. and the proposed assessment against the Taxpayer should be adjusted accordingly.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by G.S. 105-241.2(b2). After
the Board conducts a hearing, this statute provides in pertinent part:
(b2). "The Board shall confirm, modify, reverse, reduce or
increase the assessment or decision of the Secretary."
The Board having conducted a hearing in this matter and having considered the petition, the brief, the final decision and the
documents of record, concludes that the Assistant Secretary did not properly determine that the Taxpayer possessed 27,180 grams of
marijuana. This Board determines, based upon the record, that the Taxpayer only possessed 1,958.3 grams of an unauthorized
substance for the period at issue and that the proposed assessment should be amended to reflect a tax due, plus penalty and interest
based upon Taxpayer's possession of 1,958.3 grams of marijuana. Thus, the Board reduces the tax assessment levied against the
Taxpayer since he did not possess 27,180 grams of marijuana for the period at issue.
WHEREFORE, THE TAX REVIEW BOARD ORDERS that proposed assessment be and is hereby reduced to reflect the
appropriate tax plus penalty and interest as allowed by law based upon Taxpayer's possession of 1,958.3 grams of marijuana for the
period at issue.
Made and entered into the 19th day of December 2002.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1849
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Unauthorized )
Substance Tax dated May 10, 2000 by )
The Secretary of Revenue of North Carolina )
) ADMINISTRATIVE DECISION
) NUMBER: 399
)
vs. )
)
Troy Ellington Stainback, )
Taxpayer )
This Matter was heard before the Tax Review Board (hereinafter "Board") in the City of Raleigh, North Carolina, in the
office of the State Treasurer, on Wednesday, June 12, 2002, upon Troy Ellington Stainback's (hereinafter "Taxpayer") petition for
administrative review of the Final Decision of Eugene J. Cella, Assistant Secretary for Administrative Hearings, of the North Carolina
Department of Revenue entered on October 10, 2001, sustaining the assessment of unauthorized substance tax for the period of May
10, 2000.
Chairman Richard H. Moore, State Treasurer, presided over the hearing with Jo Anne Sanford, Chair, Utilities Commission
and duly appointed member, Noel L. Allen, Attorney at Law participating.
Attorney Michael S. Petty appeared at the hearing on behalf of the Taxpayer. David J. Adinolfi, II, Assistant Attorney
General appeared at the hearing on behalf of the Secretary of Revenue.
Upon calling this matter for hearing, counsel for the parties advised the Board of their settlement discussion regarding the
proposed assessment. Since all parties where present, the Board proceeded with the hearing and considered the petition, the brief, the
final decision, the documents of record, and the arguments presented, but delayed, at counsel's request, entry of the final decision until
further notice regarding the settlement. The Board, having received no notice of a settlement in the matter, renders the following
decision.
Pursuant to N.C. Gen. Stat. § 105-113.111(a) and N.C. Gen. Stat. § 105-241.1, a Notice of Unauthorized Substance Tax
Assessment was issued to the Taxpayer on May 10, 2000. The notice related to a proposed assessment of tax, penalty and interest in
the total amount of $35,166.67 based upon the possession of 500 grams of cocaine. The assessment alleged that on May 4, 2000, the
Taxpayer was in unauthorized possession of 500 grams of cocaine that did not have the proper tax stamps affixed thereto. The
Taxpayer objected to the proposed assessment and requested a hearing before Secretary of Revenue. After conducting a hearing, the
Assistant Secretary entered his decision sustaining the proposed assessment against the Taxpayer. Thereafter, the Taxpayer, through
counsel, timely filed a notice and petition for administrative review of the Assistant Secretary's Final Decision with the Tax Review
Board.
ISSUES
The issues considered by the Board upon administrative review of this matter are stated as follows:
1. Did the Taxpayer have actual and/or constructive possession of cocaine without the proper stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
The evidence submitted to the Assistant Secretary and included in the record for the Board's review is stated as follows:
1. US-1 Form BD-10, "Notice of Unauthorized Substance Tax Assessment," dated May 10, 2000.
2. US-2 Letter from the Taxpayer's attorney, dated July 20, 2000, requesting a hearing.
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1850
3. US-3 Letter to the Taxpayer's attorney, dated August 8, 2000, informing him that his client's Administrative Tax
Hearing was scheduled for September 29, 2000.
4. US-4 Letter from the Taxpayer's attorney, dated September 26, 2000, requesting a continuance.
5. US-5 Form BD-4, "Report of Arrest and/or Seizure Involving Nontaxpaid (Unstamped) Controlled Substances,"
which names the Taxpayer as the possessor of the controlled substances.
6. US-6 Incident report by Wilson County Sheriff's Office, including suspect statements and the SBI lab report.
FINDINGS OF FACT
The Board reviewed the following findings of fact in the Assistant Secretary's decision in this matter:
1. On May 16, 2001, E. Norris Tolson, Secretary of Revenue, delegated to Eugene J. Cella, Assistant Secretary of
Administrative Hearings, the authority to hold any hearing required or allowed under Chapter 105 of the North
Carolina General Statutes.
2. Assessment of Unauthorized Substance Tax was made against the Taxpayer on May 10, 2000, in the sum of
$25,000.00 tax, $10,000.00 penalty and $166.67 interest, for a total proposed liability of $35,166.67, based on
possession of 500 grams of cocaine.
3. The Taxpayer made a timely objection and application for hearing.
4. The State Bureau of Investigation's lab report stated the evidence submitted for analysis was 517.2 grams of cocaine.
5. The Taxpayer was the individual who wanted to buy the cocaine and he enlisted the services of two others to do so.
Further, the Taxpayer supplied the money, albeit counterfeit, to purchase the cocaine.
6. By enlisting the services of two others to obtain the cocaine, they both became the agents of the Taxpayer. One of
those agents clearly took possession of the cocaine. He was able to walk, then run with the cocaine, before
eventually throwing it under a parked bus. All of these acts are consistent with having possession and control of the
substance.
7. On May 4, 2000, the Taxpayer had constructive possession of 500 grams of cocaine by virtue of his agent having
actual possession of the same.
8. The cocaine used in the "reversal" drug deal has been previously taxed, but the Unauthorized Substances Tax
Division's records reflect that the taxes on this 500 grams of cocaine has not previously been collected.
CONCLUSIONS OF LAW
The Board reviewed the following conclusions of law made by the Assistant Secretary in his decision regarding this matter:
1. An assessment of tax is presumed to be correct.
2. The burden is upon Taxpayer who objects to an assessment to overcome that presumption, and this burden was not
met.
3. On May 4, 2000, the Taxpayer possessed 500 grams of cocaine and was therefore a dealer as that term is defined in
N.C. Gen. Stat. 105-113.106.
4. The Taxpayer is liable for $25,000.00 tax, $10,000.00 penalty and interest until date of full payment.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. 105-
241.2(b2). After the Board conducts a hearing, this statute provides in pertinent part:
(b2). "The Board shall confirm, modify, reverse, reduce or
increase the assessment or decision of the Secretary."
Pursuant to N.C. Gen. Stat. 105-241.1(a), a proposed tax assessment is presumed to be correct and the burden is on the
Taxpayer to rebut that presumption. Since the Taxpayer failed to provide any evidence to overcome the presumption, the Assistant
Secretary properly determined that the Taxpayer possessed an unauthorized substance on May 4, 2000.
The Board having conducted a hearing in this matter and having considered the petition, the brief, the final decision and the
documents of record, concludes that the Assistant Secretary properly determined that the Taxpayer possessed an unauthorized
substance and was a dealer as that term is defined in N.C. Gen. Stat. 105-113.106(3) and is therefore liable for the assessment imposed
against him.
WHEREFORE, THE TAX REVIEW BOARD ORDERS that the tax assessment levied against the Taxpayer be and is
hereby Confirmed.
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1851
Made and entered into the 15th day of January 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commis sion
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1852
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Unauthorized )
Substance Tax dated September 29, 2000 by )
The Secretary of Revenue of North Carolina )
) ADMINISTRATIVE DECISION
) NUMBER: 400
)
vs. )
)
Kelly Sue Locklear, )
Taxpayer )
This Matter was heard before the Tax Review Board (hereinafter "Board") in the City of Raleigh, North Carolina, in the
office of the State Treasurer, on Thursday, September 5, 2002, upon Kelly Sue Locklear's (hereinafter "Taxpayer") petition for
administrative review of the Final Decision of Eugene J. Cella, Assistant Secretary for Administrative Hearings, entered on September
10, 2001, sustaining the assessment of unauthorized substance tax for the period of September 29, 2000.
Chairman Richard H. Moore, State Treasurer, presided over the hearing with Jo Anne Sanford, Chair, Utilities Commission
and duly appointed member, Noel L. Allen, Attorney at Law participating.
Thomas W. Pleasant, counsel for the Taxpayer appeared at the hearing. David J. Adinolfi, II, Associate Attorney General,
appeared at the hearing on behalf of the North Carolina Secretary of Revenue.
A Notice of Unauthorized Substance Tax Assessment was issued to the Taxpayer, assessing $59,927.00 tax, $23,970.80
penalty and 399.51 interest, for a total proposed liability of $84,297.31. The assessment alleged that on September 29, 2000, the
Taxpayer was in unauthorized possession of 17,122 grams of marijuana without the proper tax stamps affixed to the substance. The
Taxpayer protested the assessment and requested a hearing before the Secretary of Revenue. The Taxpayer was not present or
represented at the August 24, 2001 hearing before the Assistant Secretary and no evidence was offered at the hearing on behalf of the
Taxpayer. After conducting the hearing, the Assistant Secretary issued a final decision on September 10, 2001 that sustained the
assessment against the Taxpayer. Taxpayer then filed a notice of intent and petition for administrative review with the Tax Review
Board.
ISSUES
The issues considered by the Board upon administrative review of this matter are stated as follows:
1. Did the Taxpayer have actual and/or constructive possession of marijuana without the proper stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance tax?
FINDINGS OF FACT
The Board reviewed the following findings of fact in the Assistant Secretary's final decision that was issued in this matter:
1. Assessment of Unauthorized Substance Tax was made against the Taxpayer on September 29, 2000, in the sum of
$59,927.00 tax, $23,970.80 penalty and $399.51 interest, for a total proposed liability of $84,297.31, based on
possession of 17,122 grams of marijuana.
2. The Taxpayer made a timely objection and application for hearing.
3. Neither the Taxpayer nor anyone representing the Taxpayer appeared at the hearing to offer arguments or evidence
in support of the objections to the assessment.
4. Per the State Bureau of Investigation's lab analysis, the weight of the marijuana is 17,191.44 grams.
5. On September 29, 2000, the Taxpayer possessed 17,191.44 grams of marijuana.
6. No tax stamps were purchased for or affixed to the marijuana as required by law.
CONCLUSIONS OF LAW
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1853
The Board reviewed the following conclusions of law made by the Assistant Secretary in his decision regarding this matter:
1. An assessment of tax is presumed to be correct.
2. The burden is upon the Taxpayer who objects to an assessment to overcome that presumption.
3. The Taxpayer possessed 17,191.44 grams of marijuana on September 29, 2000, and was therefore a dealer as that
term is defined in G.S. 105-113.106(3).
4. The Taxpayer is liable for $59,927.00 tax, $23,970.80 penalty and interest until date of full payment, based upon the
17,122 grams specified in the Notice dated September 29, 2000.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by G.S. 105-241.2(b2). After the Board
conducts a hearing, this statute provides in pertinent part:
(b2). "The Board shall confirm, modify, reverse, reduce or
increase the assessment or decision of the Secretary."
Pursuant to G.S. 105-241.1(a), a proposed tax assessment is presumed to be correct and the burden is on the Taxpayer to
rebut that presumption. From a review of the record, the Taxpayer failed to provide any evidence to overcome the presumption.
Thus, the Tax Review Board having conducted an administrative hearing in this matter and having considered the petition, the briefs,
the documents of record, and the Assistant Secretary's final decision, concludes that the findings of fact made by the Assistant
Secretary were supported by competent evidence in the record; that based upon the findings of fact, the Assistant Secretary's
conclusions of law were fully supported by the findings of fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE TAX REVIEW BOARD ORDERS AND DECREES that the Assistant Secretary's final decision,
entered on September 10, 2001 in this matter, be and is hereby confirmed in every respect.
Made and entered into the 19th day of December 2002.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1854
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Additional )
Income Tax for the Taxable Year 2000 by )
The Secretary of Revenue of the State of )
North Carolina ) ADMINISTRATIVE DECISION
) NUMBER: 401
)
vs. )
)
Frank L. and Linda J. Esau, )
Taxpayers )
THIS MATTER is before the Regular Tax Review Board (hereinafter "Regular Board") upon petition for administrative
review filed by Frank L. and Linda J. Esau (hereinafter "Taxpayers") regarding the Final Decision of Eugene J. Cella, Assistant
Secretary for Administrative Hearings of the North Carolina Department of Revenue (hereinafter "Assistant Secretary"), sustaining the
proposed assessment of additional individual income tax liability for taxable year 2000.
Pursuant to G.S. 105-241.1, an assessment proposing additional tax, penalty and accrued interest totaling $593.22 for taxable
year 2000 was mailed to the Taxpayers on December 13, 2001. The Taxpayers protested the assessment and filed a request for an
administrative hearing. After conducting a hearing, the Assistant Secretary of Revenue entered a Final Decision, on August 29, 2002,
that sustained the proposed assessment against the Taxpayers for tax year 2000, but the tax liability was modified to allow credit for
the North Carolina income tax withheld. Pursuant to G.S. 105-241.2, the Taxpayers filed a notice of intent and petition for
administrative review of the Assistant Secretary's Final Decision with the Tax Review Board.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, the records and documents transmitted by the North
Carolina Secretary of Revenue pertaining to this matter; and it appearing to the Board that the Taxpayers' petition should be dismissed
since the grounds and arguments upon which relief is sought have been repeatedly rejected by the Courts and are deemed lacking in
legal merit. Thus, the Board concludes that Taxpayers' petition for administrative review is frivolous and is filed for the purpose of
delay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Taxpayers' petition for administrative review be
and is hereby Dismissed.
Made and entered into the 4th day of February 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1855
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Additional )
Income Tax for the Taxable Year 2000 by )
The Secretary of Revenue of the State of )
North Carolina ) ADMINISTRATIVE DECISION
) NUMBER: 402
)
vs. )
)
James and Melanie Dunham, )
Taxpayers )
THIS MATTER is before the Regular Tax Review Board (hereinafter "Regular Board") upon petition for administrative
review filed by James B. and Melanie Dunham (hereinafter "Taxpayers") regarding the Final Decision of Eugene J. Cella, Assistant
Secretary for Administrative Hearings of the North Carolina Department of Revenue (hereinafter "Assistant Secretary"), sustaining the
proposed assessment of additional individual income tax liability for taxable year 2000.
Pursuant to G.S. 105-241.1, an assessment proposing additional tax, penalty and accrued interest totaling $1,733.09 for
taxable year 2000 was mailed to the Taxpayers on December 13, 2001. The Taxpayers protested the assessment and filed a request for
an administrative hearing. After conducting a hearing, the Assistant Secretary of Revenue entered a Final Decision, on June 25, 2002,
sustaining the proposed assessment against the Taxpayers for individual income tax liability, plus penalty and accrued interest in the
total amount of $1,769.87 for taxable year 2000. Pursuant to G.S. 105-241.2, the Taxpayers filed a notice of intent and petition for
administrative review of the Assistant Secretary's Final Decision with the Tax Review Board.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, the records and documents transmitted by the North
Carolina Secretary of Revenue pertaining to this matter; and it appearing to the Board that the Taxpayers' petition should be dismissed
since the grounds and arguments upon which relief is sought have been repeatedly rejected by the Courts and are deemed lacking in
legal merit. Thus, the Board concludes that Taxpayers' petition for administrative review is frivolous and is filed for the purpose of
delay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Taxpayers' petition for review administrative be
and is hereby Dismissed.
Made and entered into the 3rd day of February 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1856
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Additional )
Income Tax for the Taxable Years 1999 and 2000 by )
The Secretary of Revenue of North Carolina )
) ADMINISTRATIVE DECISION
) NUMBER: 403
)
vs. )
)
Jerry T. Edmundson, )
Taxpayer )
THIS MATTER is before the Regular Tax Review Board (hereinafter "Regular Board") upon petition for administrative
review filed by Jerry T. Edmundson (hereinafter "Taxpayer") regarding the Final Decision of Eugene J. Cella, Assistant Secretary
for Administrative Hearings of the North Carolina Department of Revenue (hereinafter "Assistant Secretary"), sustaining the proposed
assessment of additional individual income tax liability for taxable years 1999 and 2000.
Pursuant to G.S. 105-241.1, assessments proposing additional tax, penalty and accrued interest totaling $796.00 for taxable
years 1999 and 2000 were mailed to the Taxpayer on December 13, 2001. The Taxpayer protested the assessments and filed a request
for hearing. After conducting a hearing, the Assistant Secretary of Revenue entered a Final Decision, on July 31, 2002, sustaining the
proposed assessments, plus penalty and accrued interest against the Taxpayer for individual income tax liability in the total amount of
$1,290.55 for taxable years 1999 and 2000. Pursuant to G.S. 105-241.2, the Taxpayer filed a notice of intent and petition for
administrative review of the Assistant Secretary's Final Decision with the Tax Review Board.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, the records and documents transmitted by the North
Carolina Secretary of Revenue pertaining to this matter; and it appearing to the Board that the Taxpayer's petition should be dismissed
since the grounds and arguments upon which relief is sought have been repeatedly rejected by the Courts and are deemed lacking in
legal merit. Thus, the Board concludes that Taxpayer's petition for administrative review is frivolous and is filed for the purpose of
delay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Taxpayer's petition for administrative review be
and is hereby Dismissed.
Made and entered into the 3rd day of February 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1857
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessments of Additional )
Income Tax for the Taxable Years 1995 and 1996 by )
The Secretary of Revenue of North Carolina )
) ADMINISTRATIVE DECISION
) NUMBER: 404
)
vs. )
)
Michael W. May, )
Taxpayer )
THIS MATTER is before the Regular Tax Review Board (hereinafter "Regular Board") upon petition for administrative
review filed by Michael W. May (here inafter "Taxpayer") regarding the Final Decision of Eugene J. Cella, Assistant Secretary for
Administrative Hearings of the North Carolina Department of Revenue (hereinafter "Assistant Secretary"), sustaining the proposed
assessment of additional individual income tax liability for taxable years 1995 and 1996.
Pursuant to G.S. 105-241.1, assessments proposing additional tax, penalty and accrued interest totaling $17,522.88 for tax
year 1995, and $10,620.28, for tax year 1996 were mailed to the Taxpayer June 27, 2001. The Taxpayer protested the assessments
and filed a request for hearing. After conducting a hearing, the Assistant Secretary of Revenue entered a Final Decision, on June 18,
2002, sustaining the proposed assessments against the Taxpayer for individual income tax liability in the total amount of $18,469.09,
$10,157.52 for taxable year 1995 and $8,311.57 for taxable year 1996. Pursuant to G.S. 105-241.2, the Taxpayer filed a notice of
intent and petition for administrative review of the Assistant Secretary's Final Decision with the Tax Review Board.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, the records and documents transmitted by the North
Carolina Secretary of Revenue pertaining to this matter; and it appearing to the Board that the Taxpayer's petition should be dismissed
since the grounds and arguments upon which relief is sought have been repeatedly rejected by the Courts and are deemed lacking in
legal merit. Thus, the Board concludes that Taxpayer's petition for administrative review is frivolous and is filed for the purpose of
delay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Taxpayer's petition for administrative review be
and is hereby Dismissed.
Made and entered into the 3rd day of February 2003.
TAX REVIEW BOARD
Signature
Richard H. Moore, Chairman
State Treasurer
Signature
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature
Noel L. Allen, Appointed Member
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1858
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Denial of Claims for Refund of Sales and )
Use Tax for the Periods of November 1, 1993 )
through June 30, 1996 and January 1, 1997 )
through August 21, 1999 by the Secretary of ) ADMINISTRATIVE DECISION
Revenue of the State of North Carolina ) NUMBER: 405
)
vs. )
)
Morton Buildings, Inc. )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter "Board") in the City of Raleigh, Wake County,
North Carolina, on Wednesday, December 18, 2002, upon a petition filed by Morton Buildings, Inc. (hereafter "Taxpayer") for
administrative review of the Final Decision of the Assistant Secretary of Revenue entered on 24 May 2002 denying refund claims of
sales and use taxes for the periods of November 1, 1993 through June 30, 1996 and January 1, 1997 through August 31, 1999.
Chairman Richard H. Moore, State Treasurer presided over the hearing with ex officio member Jo Anne Sanford, Chair,
Utilities Commission and duly appointed member, Noel L. Allen, Attorney at Law participating.
Attorneys Charles B. Neely, Jr., Nancy S. Rendleman and Abraham M. Stranger appeared at the hearing on behalf of the
Taxpayer. George W. Boylan, Special Deputy Attorney General, appeared at the hearing on behalf of the Secretary of Revenue.
STATEMENT OF FACTS
Morton Buildings, Inc. ("Taxpayer") is an Illinois corporation having its principal place of business in Morton, Illinois.
Taxpayer is engaged in the business of manufacturing and installing prefabricated timber frame metal-sheathed buildings for use by
farm and industry in approximately forty (40) states. The overall style of the buildings manufactured by the Taxpayer is uniform, but
the dimensions of the buildings and its components are varied and customized to suit the purchaser's needs.
The Taxpayer fabricates and erects in North Carolina prefabricated buildings pursuant to performance contracts. Taxpayer
purchases the raw materials (steel and lumber) used in its business in bulk outside of North Carolina and stores the materials in its own
warehouses at various locations outside of this State. At factories outside of North Carolina, the Taxpayer constructs building
components from the raw materials. These building components include such items as trusses, columns, metal panels, and overhang
rafters. Taxpayer ultimately incorporates the building components into the buildings that it constructs in North Carolina.
STATEMENT OF CASE
On December 13, 1996 and December 27, 1999 the Taxpayer submitted claims for refund for the amount of sales and use tax
that Taxpayer remitted on the purchases of tangible personal property that was used to fabricate building components at the Taxpayer's
out-of-state facilities. Thereafter, the Taxpayer brought the building components into North Carolina to perform building contracts.
On January 31, 2001, the North Carolina Department of Revenue notified the Taxpayer's representative that the claims for refund were
denied. On February 23, 2001, the Taxpayer's representative notified the North Carolina Department of Revenue that the Taxpayer
objected to the denial of the refund claims and requested a hearing before the Secretary of Revenue. After conducting a hearing, the
Assistant Secretary of Revenue entered a Final Decision on May 24, 2002 denying Taxpayer's refund claims of sales and use taxes for
the periods of November 1, 1993 through June 30, 1996 and January 1, 1997 through August 31, 1999. Pursuant to N.C.G.S. § 105-
241.2, Taxpayer's attorney timely filed a notice of intent and petition for administrative review of the Assistant Secretary's Final
Decision with the Tax Review Board.
ISSUE
The issue to be considered by the Board on review of this matter is stated as follows:
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1859
Whether the Taxpayer is liable for use tax on its purchases of tangible personal property incorporated into building
components at the out-of-state locations for those buildings components that are brought into the State and used in the fulfillment of
performance contracts to erect structures.
EVIDENCE
The Tax Review Board reviewed the following evidence presented by the parties at the hearing before the Assistant Secretary
of Revenue:
E-1 Memorandum dated May 16, 2001 from the Secretary of Revenue to the Assistant Secretary of Administrative Hearings.
E-2 Taxpayer's claim for refund for the period January 1, 1993 through June 30, 1996 and statement of facts and grounds for
recovery dated December 13, 1996.
E-3 Taxpayer's claim for refund for the period January 1, 1997 through August 31, 1999 and statement of facts and grounds for
recovery dated December 27, 1999.
E-4 Letter dated December 18, 1996 from the taxpayer's representative to the Department.
E-5 Letter dated January 14, 1997 from the Department to the taxpayer.
E-6 Letter dated April 15, 1997 from the Department to the taxpayer's representative.
E-7 Letter dated April 22, 1997 from the taxpayer's representative to the Department.
E-8 Letter dated August 1, 1997 from the Department to the taxpayer's representative.
E-9 Letter dated September 16, 1997 from the taxpayer's representative to the Department.
E-10 Letter dated October 20, 1997 from the Department to the taxpayer's representative.
E-11 Letter dated November 17, 1997 from the taxpayer's representative to the Department.
E-12 Letter dated December 23, 1997 from the taxpayer's representative to the Department.
E-13 Letter dated December 31, 1997 from the Department to the taxpayer's representative.
E-14 Letter dated March 20, 1998 from the Department to the taxpayer's representative.
E-15 Letter dated December 28, 1999 from the taxpayer's representative to the Department.
E-16 Letter dated February 3, 2000 from the Department to the taxpayer's representative.
E-17 Letter dated January 5, 2001 from the taxpayer's representative to the Department.
E-18 Letter dated January 31, 2001 from the Department to the taxpayer's representative.
E-19 Letter dated February 23, 2001 from the taxpayer's representative to the Department.
E-20 Letter dated March 6, 2001 from the Department to the taxpayer's representative.
E-21 Letter dated June 7, 2001 from the Department to the taxpayer's representative.
E-22 Letter dated June 22, 2001 from the taxpayer's representative to the Department.
E-23 Letter dated July 25, 2001 from the Department to the taxpayer's representative.
E-24 Letter dated September 4, 2001 from the taxpayer's representative to the Department.
E-25 Letter dated September 10, 2001 from the Department to the taxpayer's representative.
E-26 Letter dated September 19, 2001 from the taxpayer's representative to the Department.
E-27 Letter dated October 4, 2001 from the Department to the taxpayer's representative.
E-28 Letter dated December 6, 2001 from the taxpayer's representative to the Department.
E-29 Stipulations of Fact.
E-30 Letter dated December 7, 2001 from the Department to the taxpayer's representative.
E-31 Letter dated December 13, 2001 fro m the Department to the taxpayer's representative.
E-32 Letter dated December 13, 2001 from the Assistant Secretary to the taxpayer's representative.
E-33 New York Supreme Court Appellate Division, In the Matter of Morton Buildings, Inc. v Chu, dated January 8, 1987.
E-34 Missouri Administrative Hearing Commission decision, Morton Buildings, Inc. vs. Director of Revenue, dated December 8,
1989.
E-35 Wisconsin Circuit Court decision, Wisconsin Department of Revenue vs. Morton Buildings, Inc., dated February 10, 1992.
E-36 Connecticut Supreme Court decision, Morton Buildings, Inc. v. Bannon, dated May 12, 1992.
E-37 Minnesota Supreme Court decision, Morton Buildings, Inc. v. Commissioner of Revenue, dated August 7, 1992.
E-38 Texas Court of Appeals decision, Sharp v. Morton Buildings, Inc., dated June 19, 1997.
E-39 Massachusetts Appeals Court decision, Morton Buildings, Inc. v. Commissioner of Revenue, dated August 28, 1997.
E-40 Vermont Supreme Court decision, Morton Buildings Inc. v. Vermont Department of Taxes, dated December 26, 1997.
E-41 Colorado Final Determination, In Re Morton Buildings, Inc., dated January 7, 1999.
TP-1 Brief of Petitioner Morton Buildings, Inc. dated February 6, 2002.
TP-2 State v. Roger Blackstock, 314 NC 232, 333 S.E. 2d 245 (1985).
TP-3 1957 Session Law.
FINDINGS OF FACTS
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1860
1. Morton seeks a refund for sales and use tax for the periods November 1, 1993 through June 30, 1996 and January 1,
1997 through August 31, 1999 (hereinafter collectively referred to as the "Tax Periods").
2. During the Tax Periods at issue, Morton timely filed all Monthly, Quarterly, and Annual Sales and Use Tax Returns
with the Department and tendered timely payments of the taxes shown thereon to be due.
3. On December 18, 1996, pursuant to N.C.G.S.§ 105-266.1, Morton filed an Application for Refund of Use Tax paid
with the Department of Revenue. This application was amended on September 16, 1997 and November 17, 1997.
The refund sought for the period of November 1, 1993 and June 30, 1996 was $94,280.71 plus interest as provided
by law. Morton's request for refund was timely under N.C.G.S.§ 105-266(c) and N.C.G.S.§ 105-266.1.
4. On December 28, 1999, pursuant to N.C.G.S.§ 105-266.1, Morton filed Morton filed an Application for Refund of
Use Tax paid with the Department of Revenue. The refund sought for the period of January 1, 1997 and August 31,
1999 was $171,184.40 plus interest as provided by law. Morton's request for refund was timely under N.C.G.S.§
105-266(c) and N.C.G.S.§ 105-266.1.
5. On February 3, 2000, the Department of Revenue denied Morton's Claim for Refund of January 1, 1997 and August
31, 1999.
6. On January 31, 2001 the Department of Revenue denied Morton's Claim for Refund for the period of January 31,
1993 through June 30, 1996 and January 1, 1997 and August 31, 1999.
7. February 23, 2001, pursuant to N.C.G.S. § 105-266.1, Morton submitted a timely request for an administrative
hearing for its refund claims.
8. The parties agree that Morton is entitled to a hearing before the Secretary or his designee for the refund claims for
the Tax Period pursuant to N.C.G.S. § 105-266.1.
9. Morton's Claims for Refund are for use tax paid on the cost of raw materials purchased and used in its out-of-state
factories to manufacture building components and hardware ("Building Components") that were incorporated by
Morton into buildings assembled in North Carolina. Morton accrued and paid use tax on the cost of the materials
used to manufacture the Building Components.
10. Pass through items ("Pass Through Items") include such items as lumber, cement, nails, staples, insulation,
windows, doors and some hardware that were purchased by Morton in final form from suppliers outside of North
Carolina. Morton's Claims for Refund state that all use taxes paid during the Tax Periods, less the amount of tax
paid for Pass Through Items, should be refunded to Morton on the grounds that the purchases on which those taxes
were paid are not subject to use tax under N.C.G.S. §105-164.6.
11. Morton's second refund claim of $171,184.20 was based on Morton's estimate that approximately 16.64% of the use
taxes paid by Morton during the second refund claim Tax Period related to Pass Through Items. This estimated
amount was deducted from the total use tax paid by Morton in calculating the refund amounts shown on the second
claim for refund. No such deduction was made from the first claim for re fund. More recently, Morton, having
computerized its records, was able to determine a more accurate percentage for use tax paid on Pass Through Items
for the State of North Carolina, such percentage being 34.3%; therefore the correct amount of the second refund
claim at issue in this case is $134,918.60. The parties agree that 34.3% is a reasonable estimate of the percentage of
use taxes paid by Morton during the Tax Periods related to Pass Through Items. Therefore, the correct amount of
the first refund claim is $61,942.43, and the total amount of refund claims in this case if $196,861.03 plus interest.
12. Taxpayers are allowed a credit against the amount of state and local use tax due in North Carolina for any state and
local sales or use tax legally due and paid to another state or local taxing jurisdiction for purchases of tangible
personal property stored, used or consumed in North Carolina. Morton has received all such credits to which it is
entitled. Such credits are not available with respect to the taxes at issue in this case.
13. The contract between Morton and its customers provides that title does not pass until the building is completed on
site by Morton and turned over to the customer. Morton bears the risk of loss for any damage to the Building
Components and other materials prior to that time. A copy of the standard form of contract between Morton and its
customers is attached as Exhibit A of the Stipulations of Fact (E-29).
14. For purposes of the taxes at issue in this case, Morton operates in the capacity of a construction contractor in North
Carolina.
15. Morton's customers own the real estate on which the buildings are erected by Morton.
16. The erection and installation of a Morton building is a permanent improvement to real property in North Carolina
for sales and use tax purposes as the contract between Morton and its customers provides for Morton to deliver,
erect, and affix a completed building in finished condition to the customer's building site at a lump sum price
specified in the contract.
17. The Building Components become a permanent improvement to real estate and when a completed building was
transferred to the customer, sales or use tax was not due on the sales price charged by Morton for the building.
18. Morton is a corporation organized under the laws of the State of Illinois. Its principal place of business is located in
Morton, Illinois. At all pertinent times Morton was qualified to do business in the state of North Carolina.
19. Morton is engaged in the production, sale, and on-site erection of prefabricated timber-frame, metal-sheathed
warehouses, and other buildings for use by farm and industry in approximately 40 states.
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1861
20. Morton has no factories in North Carolina at which it manufactures Building Components but Morton does maintain
sales offices in North Carolina, from which it occasionally makes retail sales of Building Components. Morton
collects and remits North Carolina state and local sales tax upon such sales. Morton makes no claim for refund of
these sales taxes.
21. The overall style of the buildings made by Morton is uniform, but various features such as doors, windows, and
skylights may be specially ordered and the dimensions of the building itself may be varied to suit the purchaser's
needs.
22. Morton purchases the raw materials ("Raw Materials") used in its business in bulk from vendors outside North
Carolina and stores them in its own warehouses in various locations outside of North Carolina. The principal Raw
Material include, among others, steel and lumber. The Raw Materials are not purchased by Morton for application
to any particular customer order, either within or without North Carolina. Determinations of the quantities of Raw
Materials to be purchased for any given period are made by Morton based on projections on a factory-by-factory
basis based on the prior history of quantities used at the respective factories and considerations of the economy.
23. During the Tax Periods Morton had several factories, all of which were located outside North Carolina. Two of the
factories were located in Kenton, Ohio and Gettysburg, Pennsylvania. Morton manufactured Building components
for its North Carolina customers only at Morton's factories in Kenton, Ohio and Gettysburg, Pennsylvania. These
two factories also made Building Components for customers in at least 16 other states. At its factories, Morton's
employees manufactured from Raw Materials the Building Components used in erecting Morton's buildings.
24. When Morton receives an order, the necessary Raw Materials are withdrawn from storage and are consumed and
transformed by Morton in the manufacture of finished Building Components in accordance with the customer's
specifications and in the manner described in paragraphs 25 through 32 hereto. The manufacturing processes
performed by Morton in each of its various out-of-state factories is uniform.
25. The Building Components that are made by Morton include trusses, lower columns, upper columns, purlins, metal
panels, overhand rafters and hardware. The manufacturing processes performed by Morton with respect to each of
those Building Components are briefly discussed below.
26. To manufacture the trusses, the upper chords and lower chords that will form the truss are run through a machine
which cuts the chords to the proper lengths and to the proper angles at both ends of each chord. Lumber webbing,
which is attached between the upper and lower chords, is also cut to the correct length and to the correct angles. The
trusses (chords and webs) are then transferred to a fixture table where they are positioned "face-up" and metal gusset
plates are positioned at each joint. Metal gusset plates are manufactured by Morton from rolled steel. The gusset
plates are then stitched into position with a pneumatic gun nailer. The truss is then repositioned "face-down" and
additional metal gusset plates are positioned onto the joints on that side of the truss. The truss is then positioned
onto a conveyor and transported through a roller press machine. The roller press machine imbeds the metal gusset
plates into the wooden chords and webs at the pre-selected positions. The trusses include end trusses and
intermediate trusses.
27. To manufacture the lower columns, Morton utilizes preservation treated lumber. The lumber is trimmed to length as
required. The lumber is then run through Morton's column machine, a computerized manufacturing process, which
indexes the lumber to various prepositioned locations and clamps it from the top and side. While clamped, nails are
driven into the column lumber at prescribed angles. The laminating process (indexing, clamping, and nailing) is
repeated until the column is completed. The lower columns then proceed to the drilling station and holes are drilled
through the bottom of the lower columns at the prescribed locations.
28. To manufacture the upper columns, Morton cuts the lumber to length and cuts the ends of lumber to the prescribed
angles. The lumber is then run through Morton's column machine, which indexes the lumber to various
prepositioned stops as part of the computerized manufacturing process. The same laminating process (indexing,
clamping, and nailing) is used for the upper columns and the lower columns. The upper columns then are affixed
with 2-inch by 2-inch blocks on the outside of the upper columns. When assembled together, the upper columns and
the lower columns form the main support, sidewall, structural corner, and end columns (collectively, the columns).
29. To manufacture the purlins, Morton feeds the lumber through a machine, a computerized manufacturing process,
which cuts each end of the lumber to the correct length, and squares the end of the lumber. Thereafter, metal
connector plates, also manufactured by Morton, are positioned at each end of the purlin and are pressed into
position. At the same time during the manufacturing process, holes are drilled into the purlins at prepositioned
locations so that the purlins may be readily assembled to the truss at the job site. Morton also manufactures wind
ties, utilizing the same process as that used to manufacture purlins.
30. To manufacture the metal panels, Morton purchases coils of galvanized cold-rolled steel which are shipped to an
independent contractor outside North Carolina for application of coatings to the steel. The rolled steel, with applied
coatings, is then delivered to Morton's factories. When a factory receives an order, it manufactures the required
interior and exterior metal panels by processing the rolled steel through a machine that rolls channels into the steel to
add strength. The steel is then cut to specific length according to the requirements of the particular order. With the
application of different paints and produced in various sizes, the metal panels are used for a variety of purposes
including, inter alia, exterior sheeting, sidewalls and roof panels.
IN ADDITION
17:21 NORTH CAROLINA REGISTER May 1, 2003
1862
31. To manufacture the overhang rafters, Morton utilizes a manufacturing process essentially similar to that employed in
manufacturing the trusses. Anywhere between 2 and 6 pieces of lumber are cut to the proper lengths, and are cut to
the proper angles at the ends of each piece of lumber. The overhang rafter is then transferred to a fixture table where
it is positioned "face-up" and metal gusset plates, manufactured by Morton, are positioned at the various joints. The
metal gusset plates are then stitched into positions with a pneumatic gun nailer. The overhang rafters are then
repositioned "face-down" and metal gusset plates are positioned onto a conveyor and transported through a roller
press machine which inbeds the metal gusset plates into the wooden members.
32. Morton also manufactures some of the hardware for the buildings at its plants in Goodfield, Illinois, using a variety
of metal working machines; an example of manufactured hardware is the gusset plates that are used in the
manufacture of trusses. To manufacture gusset plates, galvanized coil steel is run through die machines where the
steel is cut to size, straightened and punched to create diagrams with indentations to fit with the trusses.
33. All of the transportation, loading, unloading, and erection of the buildings is performed by Morton's employees or,
in certain circumstances, by subcontractors hired by Morton. The Building Components and the Pass Through Items
are transported to the building site in North Carolina by Morton's employees in its trucks, typically in one load.
34. The erection-site crew typically consists of three members: a "crew foreman", a "lead man" and a "laborer", all of
whom are Morton employees.
35. Generally, it takes Morton's crew less than one week to complete the erection of a building.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law made by the Assistant Secretary in his decision
regarding this matter:
1. N.C.G.S. § 105-164.6(a) imposes use tax on the storage, use or consumption in this state of tangible personal
property purchased inside or outside the state for storage, use or consumption in the state on the purchase price of
each item or article of tangible personal property that is stored, used or consumed in the state.
2. N.C.G.S. § 105-164.6(b) provides that an excise tax is imposed on the purchase price of tangible personal property
purchased inside or outside the state that becomes a part of a building or other structure in the state. (Typographical
error in the Final Decision is corrected as noted in Taxpayer's Petition at page 6).
3. In N.C.G.S. § 105-164.3(49) the General Assembly has broadly defined the term "use", in pertinent part, as meaning
"… the exercise of any right or power or dominion whatsoever over tangible personal property by a purchaser
thereof….." (Typographical error in the Final Decision is corrected as noted in Taxpayer's Petition at page 6).
4. The purpose of North Carolina's sales and use tax scheme is two-fold. The primary purpose is to generate revenue.
The second purpose is to equalize the tax burden on all state residents. In re Assessment of Additional N.C. &
Orange Court Use Taxes, 312 N.C. 211, 322 S.E.2d 155 (1984).
5. The purpose of the use tax is to remove the discrimination against local merchants resulting from the imposition of a
sales tax, and to equalize the burden of the tax on property sold locally and that purchased outside of the state.
Watson Indus. v. Shaw, 235 N.C. 203, 69 S.E. 2d 505 (1952).
6. When construing a statute imposing a tax, any ambiguities are resolved in favor of the taxpayer.
7. Articles of tangible personal property that are used to fabricate building components brought into the state are used
in the same manner as property not modified or incorporated into components as contemplated under N.C.G.S. §
105-164.6(a).
8. This property becomes part of a build